Canadian Dollar Update, August 19, 2021 – Canadian Dollar Plunges on Taper Fears
USD/CAD Open: 1.2742-46, Overnight Range: 1.2651-1.2771, Previous Close: 1.2626
WTI Oil is at $63.55 and gold is at $1,782.30. US markets are mixed today.
For today, USD resistance is at 1.2835. Support is at 1.2767.
• FOMC minutes warn of tapering by Christmas
• Global equity and commodity markets sink
• US dollar opens with gains across the board
The Canadian dollar ignored yesterday’s hotter-than-expected inflation number, Canada July CPI surged to 3.7% y/y in July, compared to a 3.1% rise in June. Many analysts suggested the gains were due to base effects but warn that inflation is picking up momentum. FX traders were unconcerned and USDCAD barely budged.
That changed after 2:00 pm ET when the minutes from the July 28 FOMC meeting were released. Traders zeroed in on the passage that said: “most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year because they saw the Committee’s “substantial further progress” criterion as satisfied with respect to the price-stability goal and as close to being satisfied with respect to the maximum[1]employment goal.”
Wall Street sold off with the Dow Jones Industrial Average closing down 383 points, oil prices falling, and the US dollar in demand.
The trend continued in Asia with Fed tapering concerns piling on fears from spreading coronavirus delta-variant cases in Asia and other regions, China’s regulatory crackdown on various sectors, and geopolitical concerns from the Taliban takeover of Afghanistan.
West Texas Intermediate (WTI) oil prices dropped 3.0% overnight, continuing the slide from July 6 when prices topped out at $76.75/barrel. The combination of Opec production increases ahead of a potential global economic slowdown due to the resurgence of COVID-19 is weighing on crude and undermining the Canadian dollar.
The Canadian dollar may have come under additional selling pressure in Asia. The US dollar opened in NY with gains against the major G-10 currencies but gave back some gains due to profit taking in early NY trading.
US Philadelphia Fed Manufacturing PMI and weekly jobless claims are ahead.
Today’s Suggested Range USD/CAD: 1.2740 – 1.2840