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Canada improves trade balance numbers but did not beat expectations.

CAD - Canadian Dollar

The Loonie has been in rally mode this morning and in overnight trading, but it is erasing its gains quickly after the trade balance numbers were released. According to Statistic Canada, imports fell 1.7 percent in September, while exports declined by 1.3 percent. As a result, Canada's merchandise trade deficit with the world narrowed from $1.2 billion in August to $978 million in September. However, the current number of -1 billion came wider than the expected -0.6 billion. This is making the USD/CAD pair bounce and erase some Loonie gains; it is trading at 1.3142 at the time of this writing. According to BNY Mellon, a dovish BoC is now pricing a 50 percent chance of a cut in Q1 next year, although Dec BoC is pricing some optionality (25 percent chance of a cut).

Key Movers

Australia held rates unchanged at 0.75 percent as expected, but left the door open to further easing if needed. The RBA is expecting inflation to gradually pick up, holding at around 2 percent over 2020 and 2021 with growth picking up modestly to about 3 percent in 2021. Westpac Chief Economist Bill Evans wrote in a note regarding the RBA decision, “…there is nothing in this statement that prompts us to revise our current forecast that rates will be on hold in December with the next and final rate cut occurring in February next year." The AUD/USD pair is increasing 0.42 percent at the time of this writing.

U.S. and Chinese officials are actively considering rolling back some tariffs to assure the partial trade deal under negotiation. Furthermore, President Xi Jinping echoed China's commitment to the global trading order in Shanghai, where he said the country would, "…continue to lower tariffs and institutional transaction costs." He added, "…we must all put the common good of humanity first rather than place one's interests above the common interests of all." He didn't mention the current negotiations with the U.S. or with Trump.

The U.S. - China negotiations continue with optimism, and a phase-one deal might be ready for signatures in the coming weeks. China wants the U.S. to roll back tariffs on $360 billion of its imports before President Xi Jinping agrees to travel to the U.S. to sign a partial trade deal. At the same time, China may remove levies on U.S. goods, mostly farm products.

In China, the central bank reduced the cost of one-year funds for banks (for the first time since 2016) to calm nerves about tightening liquidity. The USD/CNH pair (Greenback versus Yuan) fell 0.47 percent, breaking the psychological support of 7.00 (stronger Yuan).

Expected Ranges

USD/CAD: 1.3118 - 1.3163 ▼

EUR/CAD: 1.4550 - 1.4603 ▼

GBP/CAD: 1.6897 - 1.6961 ▼

AUD/CAD: 0.9035 - 0.9111 ▲

NZD/CAD: 0.8397 - 0.8433 ▼