The Canadian dollar is underperforming compared to its Antipodean cousins, especially the New Zealand dollar. NZD/USD soared overnight, rising from $0.6332 to $0.6416 after the Reserve Bank of New Zealand surprised traders and analysts and left the benchmark Overnight Cash Rate (OCR) unchanged. Tuesday’s soft Q4 inflation report was viewed as confirmation that a rate cut was forthcoming.
Instead, the RBNZ Monetary Policy committee saw things differently. The statement noted that "economic developments since the August Statement had been offsetting for the monetary policy outlook." It also said that "members anticipated a lift in economic growth during 2020 from the easing of monetary policy that has taken place since early 2019 and from stronger fiscal stimulus." The Kiwi rally didn’t help the Canadian dollar, which drifted lower overnight.
For its part, the loonie was on the defensive after U.S. President Trump’s speech to the Economic Club of New York failed to deliver any new insight on the U.S./China trade war. Analysts were anticipating that Trump would announce tariff rollbacks on Chinese imports as evidence that the trade negotiations were progressing as rumoured. That wasn’t the case. He railed against China’s trade actions prior to his presidency and then said "I don’t blame China, by the way. I blame our leaders, because we should’ve been doing what they were doing."
The speech was typical Trump bluster -- all bun-no hamburger.
The Canadian and Australian dollars were the only G-10 currencies to start the Toronto session, weaker than where they closed yesterday. EUR/USD is unchanged. The single currency bounced in a narrow $1.1002-$1.1019 range, unable to get any traction in either direction. Traders are hoping that Federal Reserve Chair Jerome Powell will change that situation with his speech before a joint session of Congress. However, it has only been two weeks since the Federal Open Market Committee indicated that interest rates would remain steady for the foreseeable future.
GBP/USD has been fairly stable, although with a modestly negative bias. Prices traded in a 1.2824-1.2862 range with the election and Brexit fears overshadowing a host of domestic economic data. U.K. Consumer Price Index, Retail Price Index and Producer Price Index data were lower than forecast but for the most part, largely unchanged from the previous releases.
USD/JPY traded very erratically in a 108.80-109.14 range due to disappointment from Trump’s speech, the apparent lack of progress in the U.S./China trade talks, and lower U.S. Treasury yields.
The Canadian dollar continues to take direction from broad U.S. dollar sentiment. There isn’t any domestic data available today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
