Canadian Dollar Update, April 23, 2021 – Canadian Dollar Flexing its Muscles
USD/CAD Open: 1.2483-87, Overnight Range: 1.2472-1.2508, Previous Close: 1.2504
WTI Oil is at $61.73 and gold is at $1,778.00. US markets are higher today.
For today, USD resistance is at 1.2532. Support is at 1.2473.
• Improving global risk sentiment undermines US dollar
• Eurozone and UK economic data better than forecast
• US dollar opens with losses against the major G-10 currencies
The Bank of Canada is feeling feisty. The Bank of Canada’s hawkish shift on Wednesday, improving global risk sentiment, and firm oil prices have lifted the currency close to its 2021 peak. It may have further to go.
The BoC may be the first G-10 central bank to raise interest rates, and that is fueling Canadian dollar demand. The BoC upgraded its 2021 growth forecast predicting GDP will rise 6.8%, well above the 3% prediction they made in January. The improved outlook is due to the vaccine rollout progressing, which they expect will spark strong consumption-led growth. The BoC is forecasting that higher commodity prices will drive a solid rebound in commodity prices.
Policymakers believe that economic capacity wasn’t as bad as they previously thought, and businesses plan to speed up the pace of investments. Nevertheless, they think the economy has a lot of slack and requires considerable monetary policy support. Despite that, they announced they would reduce quantitative easing from $4.0 to $3.0 billion per week.
On Monday, the Canadian government tabled its first budget in over two years. They predicted the budget deficit would be $338 billion in 2021, an improvement over October’s guess of $389.0 billion. Interestingly, their growth forecast is only 5.8%, well below the 6.8% predicted by the BoC.
The government did not introduce any new capital gains taxes on investment income. President Biden announced plans to double the US capital gains tax to 43.4%, which could have trickle down impacts in Canada down the road.
The US dollar was on the defensive overnight and opened in New York with losses across the board.
Bitcoin (BTCUSD) suffered badly, falling from $55,471.08 to 47,467.91 because of Biden’s capital gains tax plans.
EURUSD climbed to 1.2062 from 1.2014, fueled by better than expected Eurozone PMI data, which suggested the economy was recovering from the pandemic. Traders were also relieved that the ECB monetary policy meeting was as tame as expected. They left interest rates and monetary policy unchanged. Tapering concerns were dismissed after President Christine Lagarde said it was too early to discuss and a decision would be data dependent.
There are not any Canadian or US economic reports today, leaving Canadian dollar direction determined by broad US dollar sentiment and Wall Street.
Today’s Suggested Range USD/CAD: 1.2450 – 1.2550