Canadian Dollar Drops on Broad USD Gains

The Canadian dollar added to yesterday’s losses in a busy overnight session.  The Canadian dollar came under pressure yesterday after US Q2 GDP data was a lot stronger than predicted and that pressure continued in Asia and Europe.  The US data isn’t the only reason for the Canadian dollar weakness.  Today is month end which is when many portfolio managers rebalance their positions.  Today, the indication is that the managers will need to buy US dollars.

There is a lot of important US economic data due today.  That data includes weekly Initial Jobless Claims, Challenger Job cuts, Personal Consumption Expenditures, Chicago Purchasing Managers Index and pending Home Sales.  The expectations are that the data may surprise to the upside, and underpin the US dollar on revived rate hike expectations.

The Canadian dollar may be able to defend against a rising US dollar if Canada GDP exceeds the 3.7% forecast.  A strong print could support another Bank of Canada rate hike as early as September, although those odds are still very low.

In Asia, the New Zealand dollar was the big loser thanks to weaker than expected data.  The ANZ Business Confidence index fell to 18.3 in August, down from 19.4 in July.  The Activity Outlook also dropped.  (Actual 38.2% vs previous 40.3%)  RBNZ Governor Graeme Wheeler’s comments on Wednesday, calling for a weaker currency, and the soft data,  drove NZDUSD from 0.7208 to 0.7146

AUDUSD drifted lower although losses were buffered by mixed China data.  China August Manufacturing PMI rose 51.7 vs. forecast of 51.3, while non-manufacturing PMI shrank to 53.4 from 54.5

USDJPY climbed to 110.61 from 110.22, supported by yesterday’s strong US GDP data and reported buying for month end rebalancing.

EURUSD traded sideways in Asia and eased lower in Europe. Eurozone inflation data (Actual 1.5% vs forecast 1.4%)  beat expectations, Unemployment was as expected and German Retail Sale missed.

Sterling traded uneventfully in Asia but dropped from 1.2928 to 1.2875 in Europe.  Month end demand for dollars and EURGBP buying overshadowed a Bank of England Monetary Policy Committee member’s call for a rate hike.

Oil prices traded higher, supported by yesterday’s EIA report of a 5.39 million barrel drop in US crude inventories with month end flows playing arole.  WTI traded in a $45.61-$46.31 range and is trading at the overnight peak.

 

FX Ranges for major currency pairs

close Open High Low
30-Aug-17 31-Aug-17
EURUSD 1.1888 1.1876 1.1904 1.1868
USDJPY 110.33 110.63 110.65 110.22
GBPUSD 1.2920 1.2883 1.2928 1.2874
USDCHF 0.9642 0.9656 0.9657 0.9624
AUDUSD 0.7901 0.7888 0.7921 0.7884
NZDUSD 0.7900 0.7150 0.7208 0.7146
USDCAD 1.2621 1.2634 1.2661 1.2622
GOLD 1308.73 1311.00 1313.28 1306.66
WTI 45.97 46.11 46.13 45.61

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