USD/CAD - Canadian Dollar Trading Sideways
The Canadian dollar pretty much stayed put overnight. There was no shortage of data or central bank-speak, but none of it was directly aimed at the currency. Canadian dollar traders are keeping their eyes on the oil market. The Organization of the Petroleum Exporting Countries and Non-OPEC countries are slated to meet July 12. OPEC members want to extend production cuts through to the end of the year, but Russia is not that keen.
The U.S. wants production to return to normal, especially since the risk of supply disruptions increased after the attacks in the Gulf of Oman. Traders are also very concerned about the impact of a prolonged China/U.S. trade dispute on global growth and global oil demand.
The China/U.S. trade dispute was one of the factors contributing to the Reserve Bank of Australia’s June 4 rate cut. The minutes from that meeting were released overnight. The RBA said that it was "more likely than not" that additional rate cuts would be needed to spur inflation and wage growth., Commonwealth Bank of Australia economists predicted two more rate cuts in 2019, which if they occur would take the OCR rate to 0.75%. The dovish bias was widely expected, but AUD/USD declined, nevertheless. The downward pressure on AUD/USD contributed to the bearish Canadian dollar sentiment.
Bank of Japan Governor Haruhiko Kuroda did his part to drive USD/JPY down. He said that the Bank of Japan needed to be "patient" in keeping the current monetary policy easing policy since inflation was well below its price target. Selling of CAD/JPY undermined the Canadian dollar.
The U.S. dollar opened in Toronto with gains across the board except against the Japanese yen. Once again, European data and U.K. politics bolstered demand for greenbacks, and the Canadian dollar was collateral damage.
The German ZEW data did not impress traders, and neither did a downgrade of 2020 German growth by the IFO institute. The June ZEW Current Situation index rose to 7.8 from 6.0, but those results were overshadowed by the Economic Situation Index falling to -21.1 from -2.1 in May.
Making things worse, the Eurozone ZEW Economic Sentiment Index fell to -20.2 from -1.6 in May. Lower than forecast euro-zone inflation data was the icing on the cake with May Core Consumer Price Index at -0.1% rather than 0.0% forecast.
That news drove EUR/USD down from $1.1241 to $1.1182, but sellers got added incentive from European Central Bank President Mario Draghi. He reminded markets that persistently low inflation would lead to further monetary policy easing.
The Canadian dollar bounced inside a narrow USD/CAD range of $1.3403-30. Traders are looking for guidance from today’s Manufacturing shipments data and tomorrow's inflation report.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians