The Canadian dollar is poised to end the week as the best performing major G-10 currency after rising 0.19% since Monday’s New York opening level. The British pound is the worst-performing currency, dropping 0.63%.
It was an uneventful overnight session. There was a lack of top-tier economic data available and nothing on the horizon today.
The major currency pairs meandered in narrow ranges typical of dull summer markets.
The Canadian dollar remains within spitting distance of the US 80 cent level. Traders are keeping an eye on US and Canada interest rate differentials, commodity prices, particularly oil, and the Bank of Canada narrative around interest rate increases.
Prime Minister Justin Trudeau may add another wrinkle into the works. News outlets report he plans to call an election for September 20, hoping voters will reward him with a majority government.
The Canadian dollar peaked at the beginning of June and has declined steadily since. The decline coincided with a slide in West Texas Intermediate (WTI) oil prices from $76.95/barrel to $65.10/b. However, oil prices have recouped some losses, trading at $69.00/b today, but the Canadian dollar remains under pressure.
The disconnect is due to downward global growth forecasts for the second half of this year, which negatively impacts oil demand. That suggests oil prices will struggle to regain upward momentum.
The Canadian dollar also rallied when the Bank of Canada contemplated interest rate hikes sooner than expected and sooner than the U.S. Federal Reserve. That sentiment changed following two robust U.S. non-farm payrolls reports and two hot inflation increases. Traders now believe the Fed may start tapering before year-end.
EUR/USD eked out a tiny gain overnight, while GBP/USD suffered a minor loss.
The Michigan consumer sentiment index is expected to be unchanged at 82.2.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
