The Canadian dollar consolidated yesterday’s losses in a USD/CAD range of $1.2104-$1.2140 overnight, before dropping to $1.2092 in New York trading.
The overnight session was uneventful. The major Asia equity indexes closed modestly lower except for Australia’s ASX 200, which was unchanged. European bourses are mixed. The FTSE 100 is flat, the German DXA is lower, and the French CAC slightly higher. S&P 500 and Dow Jones Industrial Average futures are in negative territory. Gold and oil prices are trading with small losses. FX markets traded sideways.
U.S. Federal Reserve Vice Chairman Richard Quarles opined about tapering yesterday, saying, “If my expectations about economic growth, employment, and inflation over the coming months are borne out, it will become important for the (Federal Open Market Committee) to begin discussing our plans to adjust the pace of asset purchases at upcoming meetings.”
He didn’t say anything “taper-tantrum” worthy, but the U.S. dollar caught a bit of a bid, anyway.
The U.S. is flexing its trade muscle again, albeit sans the inflammatory tweets. Chinese Vice Premier Liu He and U.S. Trade Representative Katherine Tai reportedly had an “honest, pragmatic, and constructive” discussion yesterday, according to China’s Ministry of Commerce. FX markets ignored the news.
The same can’t be said about the Canada-U.S. trade dispute. “Honest” and “constructive” are terms missing as the Americans reopen the softwood lumber disputes and added dairy to the mix.
Traders are awaiting today’s U.S. data dump. Q1 Gross Domestic Product is expected at 6.5%% q/q, with a risk of an upside surprise. The Durable Goods forecast is 0.7%, while weekly jobless claims are predicted at 425,000, down from 444,000 last week.
EUR/USD drifted in a $1.2176-$1.2214 range ahead of today’s U.S. data. German GfK consumer confidence improved to -0.7 from -8.6, but was below the forecast of -5.2. European Central Bank policymaker Pablo de Cos added his voice to the dovish chorus, saying the rise in inflation in the Euro area is inflationary.
GBP/USD traded in a $1.4093 to $1.4138 band, underpinned in part by sales of EUR/GBP. The U.K. is closed Monday due to the May 31 Spring Bank Holiday
The Canadian dollar is being undermined by new concerns around U.S./Canada trade. Steady to firm WTI oil prices are ignored. The bullish Canadian dollar outlook is stale. Expectations of a robust economic rebound sparked by pent-up consumer demand is reflected in current levels. The currency pair needs fresh incentives to plow below USD/CAD support at $1.2040-50.
There are not any Canadian economic reports today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians