The Canadian dollar inched higher overnight, extending gains from Friday. USD/CAD fell from Friday’s $1.2604 peak to a low of $1.2522 in New York today due to a mix of profit-taking, improved risk sentiment, and lower U.S. 10-year Treasury yields. Traders ignored lower oil prices.
West Texas Intermediate, the North American benchmark, topped out at $84.92/barrel on November 9 and have since slid steadily lower.
Concerns about rising U.S. inventories, slowing demand, and fears that the Biden Administration will release supplies from the Strategic Petroleum Reserves drove prices to a low of $79.62/b overnight.
Chinese October Industrial Production rose 3.5% y/y compared to the consensus forecast of 3.0% y/y. Analysts suggest the gain is due to the easing of energy shortages. However, they caution that gains may not be repeated in November because of the expanding property development downturn.
Chinese Retail Sales rose 4.9% y/y, easily topping the forecast for a 3.5% gain. However, renewed coronavirus outbreaks in some Chinese regions tempered enthusiasm.
President Biden and President Xi Jinping are meeting virtually today. They reportedly will discuss terms of trade, economic coercion, human rights, and Taiwan. The talks are unlikely to have any impact on FX markets.
EUR/USD drifted higher, rising from $1.1438 to $1.1463 in New York due to broad U.S. dollar weakness. However, gains are limited as European Central Bank President Christine Lagarde reaffirmed her dovish outlook. She predicted that Euro area Gross Domestic Product would rise above its pre-pandemic level by the end of the year. She hedged that forecast by saying growth was being hampered by supply chain disruptions causing shortages of materials, and equipment. Lagarde said the conditions for liftoff will not be satisfied in 2022. EUR/USD continues to consolidate losses and is in a downtrend while prices are below $1.1470.
GBP/USD rallied from $1.3405 to $1.3442 due to broad U.S. dollar weakness. Prices are also supported by anticipation that a robust U.K. employment report on Tuesday will lead to the Bank of England raising interest rates in December.
USD/JPY is trading at the bottom of its 113.76-114.04 range mainly due to the drop in U.S. treasury yields. Traders ignored news that Japan’s Q3 GDP fell 3.0% y/y as the drop was due to coronavirus restrictions.
Canada releases Wholesale and Manufacturing Sales data today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians