(MENAFN - Baystreet.ca) The Canadian dollar opened in Toronto unchanged from where it closed on Friday.Even so,it managed to outperform the rest of the G-10 majors except for the euro. The Canadian dollar is getting support from Friday's soft U.S. economic data. Building Permits and Housing Starts were mixed, but the Michigan Consumer Sentiment Index was very soft. The data raised the odds for a September 18 rate cut to 92.7%.
Earlier last week, Canadian existing home sales data came in higher than expected, which suggests the domestic economy is growing faster than the Bank of Canada forecast. That suggests the Bank of Canada will have a harder time justifying a rate cut, even though the rest of the G-10 central banks are in easing mode.
CNBC analysts suggest China's latest interest rate policy tweak is actually a rate cut. On Saturday the People's Bank of China announced changes to the Loan Prime Rate. The LPR will be linked to rates sets during open market operations and reported on the 20th of each month.
Equity traders loved the news. The Shanghai Shenzhen CSI 300 index surged 2.17%, lifting Asia and European equity indices in the process. Wall Street is expected to opene with triple digit gains today.
The FX market reaction was underwhelming. All the majors opened very close to there closing levels and traded in narrow, well-defined ranges.
USD/JPY climbed from 106.25 to 106.68 on the back of the improved risk sentiment and a 4.75% surge in US 10-year Treasury yields. The Japanese trade surplus narrowed sharply, which also supported prices.
AUD/USD managed to outperform NZD/USD thanks toChina's interest rate tweak as the Reserve Bank of New Zealand is viewed as more dovish than the Australian central bank.
EUR/USD trade quietly overnight, and opened close to unchanged. Prices flat-lined in Asia and then inched higher in Europe, supported by fresh talk of fiscal stimulus in Germany and profit-taking after making a new 2019 low on Friday
GBP/USD enjoyed a profit-taking rally.British Prime Minister Boris Johnson's visit to Germany and France raised hopes that it would yield some European Union concessions, reducing the risk of a hard Brexit. However, it may just be noise as the Irish border issue is the sticking point.
Canadian dollar traders are looking ahead to top-tier data available this week Wednesday, Canada's inflation report is released, and Friday Retail Sales are on tap. Better-than-expected data will boost the currency while weak data will lead to selling pressures.
Traders are awaiting Friday's speech by Fed Chair Jerome Powell and the G-7 meeting August 24-27.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians