(MENAFN - Baystreet.ca) The Canadian dollar rally took a breather overnight. The domestic currency surged yesterday on the back of skyrocketing oil prices and broad U.S. dollar weakness. That combination drove USD/CAD from $1.3360 to $1.3279 in Asia overnight. Prices rebounded in Europe alongside a modest U.S. dollar recovery.
China Industrial Production rose 5.3%, year over year in January which was below the forecast and December's 5.7% result. The Australian and New Zealand dollars were sold against the U.S. dollar on the news, and the Canadian dollar was as well. U.S. dollar strength combined with a small rise in U.S. Treasury yields and Wednesday's better than expected U.S. Durable Goods Orders data powered USD/JPY from a low of 111.15 to 111.72.
Robust oil prices are underpinning the Canadian dollar. West Texas Intermediate (WTI) climbed to $58.65 U.S./barrel overnight, extending the rally that began last Friday. WTI was in demand after Energy Information Administration (EIA) data showed a surprising drawdown of U.S. crude inventories for the week ending March 8. Later on, officials in the U.S. administration said they planned on reducing Iran's oil exports to less than one million barrels per day by reviewing sanction exemptions.
The ongoing Venezuela production problems completed the trifecta of good news for crude. Oil prices trimmed their gains in early Toronto trading today which led to Canadian dollar selling as well.
The commodity currency bloc activity was just a side-show for FX markets. The British pound was in the center ring during the overnight session and early Toronto trading. The U.K. parliament voted on a motion to prevent a "no-deal" Brexit late yesterday, and the results overlapped the close and Asia open. GBP/USD surged to 1.3370 at that point and bounced in a $1.3240-$1.3330 until Europe opened. Prices have dropped steadily since then, on a mix of profit-taking and uncertainty around the next Brexit developments. U.K. politicians are back at it again today, this time, voting on asking the European Union for an extension to Article 50. The E.U. does not have to grant the request, but expectations are that it will extend the deadline for three months. There was good two-way demand for GBP/CAD.
U.S. Durable Goods Orders were higher than forecast which helped take some of the sting out of last Friday's weak employment report. That data was the catalyst for U.S. dollar buying. However, the Canadian dollar and the rest of the G-10 major currencies may have started today's session with a loss compared to yesterday's close, but the currencies are well above their opening levels on Monday.
Today's U.S. data includes the weekly Jobless Claims report. Canada releases the housing price index. Both data sets will have minimal impact on FX trading.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians