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“The Canadian dollar is grinding lower due to broad US dollar strength as strong economic data keeps the focus on the risk of US interest rate hike rising faster and higher than previously expected which would benefit the US dollar.” Said Rahim Madhavji, President of KnightsbridgeFX, a currency exchange company that helps Canadians get better exchange rates than the banks.
Friday’s US employment report didn’t do much to encourage the rate hike fears, but it didn’t do much to dissuade them either. The US economy created 162,000 new jobs in April. The forecast was for a 192,000 gain. A drop in the unemployment rate to 3.9% was an 18 year low. Most of this is US dollar positive and Canadian dollar negative.
The Canadian dollar plunged on the news. USD/CAD rose from 1.2844 to 1.2914 and then dropped to the low just as quickly. Later in the day, Canadian April Ivey PMI jumped to 71.5 (previous 59.9) which provided the Canadian dollar with a bit of support, but not enough to take in out of the 1.2820-1.2920 range.
The Canadian dollar is not getting much support from sky-high oil prices. WTI oil soared from $69.74/barrel, to $70.66/barrel. Traders are concerned about diminishing supply due to Venezuela’s production issues and increasing risks that President Trump will take the US out of the Iran nuclear deal. Over the longer term, rising oil prices should benefit the loonie.
The biggest issues facing the Canadian dollar are a potential US rate hike, strengthening US economy, and NAFTA negotiations.
Overnight FX trading was on the quiet side because of holidays in Great Britain and Australia. AUDUSD got a short-lived lift from domestic economic data, but the gains were erased because of broad US dollar strength. NZDUSD tracked AUDUSD moves but bearish sentiment on US/NZ interest rate differentials is weighing on the currency.
Japan traders returned from Golden Week holidays. They sold USDJPY but quickly changed their minds after the Bank of Japan policy meeting minutes were released. A couple of policy committee members said it was too early to discuss exiting easy monetary policy and USDJPY rallied, rising from 108.76 to 109.31.
EURUSD climbed in Asia as traders there reacted to the US employment report data. The rally stalled under resistance at 1.2000 and prices dropped steadily in Europe, opening in New York at session lows.
Sterling touched key support in the 1.3480 area on Friday and since then has been consolidating in a 1.3528-1.3563 range. Prices are supported ahead of “Super Thursday” in the UK. A host of economic reports, the Bank of England policy meeting, Quarterly Interest Rate report and Governor’s press conference put the “super” into the day.
The lack of UK traders will ensure a quiet FX session in North America. Traders will be content to await additional developments from the US/China trade talks, Iran Nuclear deal news and Wall Street activity.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians.
FX Ranges
|
7-May-18 |
Range |
|
3-May-18 |
|
Open |
High |
Low |
close |
EURUSD |
1.1929 |
1.1976 |
1.1922 |
1.1958 |
USDJPY |
109.28 |
109.31 |
109.76 |
109.08 |
GBPUSD |
1.3530 |
1.3563 |
1.3527 |
1.3536 |
USDCHF |
1.0039 |
1.0041 |
0.9985 |
1.0006 |
AUDUSD |
0.7510 |
0.7541 |
0.7509 |
0.7534 |
NZDUSD |
0.7019 |
0.7039 |
0.7008 |
0.7019 |
USDCAD |
1.2873 |
1.2873 |
1.2842 |
1.2862 |
GOLD |
1,313.93 |
1318.75 |
1312.13 |
1314.37 |
WTI |
70.41 |
70.66 |
69.74 |
69.77 |
