The Canadian dollar continued to consolidate gains from Friday in another uneventful overnight session. There is a lack of top-tier actionable economic data to provide FX direction, and the available data is ignored.
The focus is on the Kansas City Fed’s Jackson Hole Symposium, which begins Thursday, and the keynote speech from Federal Reserve Chair Jerome Powell.
Last week, the Federal Open Market Committee minutes and numerous hawkish interviews and speeches from Fed policymakers convinced traders that Powell would use the Symposium to announce the Fed’s tapering plans. The U.S. dollar soared, and equity indexes fell.
That view shifted 180 degrees after softer than expected U.S. economic data and a surge in COVID-19 delta variant cases suggested Powell would stick to his view that the US economy has not seen the prerequisite “substantial further progress” needed to begin tapering.
The Canadian dollar is a passenger on the FX Express. Price action is determined solely by external events, with West Texas Intermediate oil prices playing a role. WTI oil is trading at $67.71 in New York, up nearly 10% since Monday, and has boosted the loonie.
Last week, USD/CAD soared from $1.2514 on Monday to $1.2944 on Friday, a 3.4% gain. The rally was triggered by the FOMC minutes, which said: “that most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year.”
The rally started reversing in NY trading Friday, as traders downgraded tightening concerns due to rising COVID-19 delta-variant cases that could put a damper on U.S. growth and reduce the necessity to taper early. USD/CAD extended Friday’s losses all this week but found support in the $1.2580 area.
EUR/USD is rangebound and trading with a negative bias while prices are below $1.1770. German IFO data showed Business Climate Index falling to 99.4 points, after 100.7 in July. IFO said the decline was due mainly to significantly less optimism in companies’ expectations. However, the current situation is somewhat better than in the previous month.
Today, U.S. July Durable Goods Orders are expected to decline 0.3%, which should not impact FX trading.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians