Canadian Dollar Update, February 1, 2020 – Canadian Dollar still basking in GDP glow
USD/CAD Open: 1.2801-05, Overnight Range: 1.2764-1.2817, Previous Close: 1.2778
WTI Oil is at $52.39 and gold is at $1,860.48. US markets are higher today.
For today, USD resistance is at 1.2864. Support is at 1.2796.
• US ISM Manufacturing PMI ahead
• Silver prices soar, highest since 2013
• Global equities start new month on firm footing
The Canadian dollar rallied Friday, after Canada November GDP was higher than expected, rising 0.7% m/m compared to forecasts for a 0.4% gain. USDCAD dropped from 1.2850 to 1.2740 on the news. However, the result leaves Canada’s economy still 3% lower than its pre-pandemic level, which tempered USDCAD selling enthusiasm. All in all, it was a strong report, suggesting that the domestic economy is more resilient than previously thought. However, the shortage of vaccines for the domestic market means the economic rebound is easily de-railed.
Global equity markets started the new month on solid footing. Asia equity indexes closed with gains, and European bourses post solid gains, led by the German Dax which is up 1.5%. S&P 500 futures point to a positive open on Wall Street. Oil and gold prices have climbed around 0.90% since Friday’s close.
Silver traders entertained markets overnight. Silver (XAGUSD) jumped 10%, leading some analysts to suggest it was a “GameStop” move directed by retail traders. Others dismissed that view because the silver market is far deeper than GameStop and thus harder to manipulate.
The US dollar opened with gains against the G-10 majors, except against the British pound which managed to squeeze higher.
EURUSD traded sideways, with a negative bias in Asia, then dropped from 1.2141 to 1.2071 in early NY trading. Traders ignored modest improvements in Eurozone Manufacturing PMI and employment, preferring to concentrate on bearish short-term technicals which are bearish below 1.2150, looking for a retest of 1.2110. Italian politics are also a negative as politicians seek to find enough common ground to form another coalition government and avoid an election. Sentiment is also negative after “verbal currency intervention” from many ECB officials.
GBPUSD outperformed the rest of the G-10 majors with prices climbing from 1.3696 to 1.3757. However, the rally didn’t last, and prices dropped to 1.3705 in NY. The currency outperformed in part because the UK is ahead of the competition in COVID-19 vaccinations. Prices were underpinned by better than expected January Manufacturing PMI, which was 54.1 compared to previous estimates of 52.9.
AUDUSD and NZDUSD are trading in the middle of their overnight ranges after the EURUSD retreat paused. AUDUSD traders are looking ahead to the RBA monetary policy meeting on Tuesday. Analysts expect that officials will offer an upbeat outlook.
US ISM manufacturing data is due today.
Today’s Suggested Range USD/CAD: 1.2750 – 1.2850