Canadian Dollar Update – Canadian dollar gains accelerate

• Divergent Fed and BoC monetary policy outlooks lifting Loonie.
• Lots of US data today, although the quality is questionable.
• US dollar opens with losses across the board.

Merry Christmas and Happy New Year from Knightsbridge Foreign Exchange. This is the final commentary update of 2025, and will resume on January 5, 2026.  We are still open for currency exchange daily.

USDCAD open: 1.3702, overnight range 1.3702-1.3755, close 1.3747, WTI 58.08, Gold 4484.09

The Canadian dollar is grinding higher on the back of the soft US dollar.  Canada Raw Materials Price and Industrial Price indexes are due today and October GDP is on tap tomorrow.

The US is set to publish current account figures alongside Durable Goods Orders, Q3 GDP, Capacity Utilization, Industrial Production, and Q3 PCE Prices. Any insight drawn from October data should be treated with caution, as the collection process was compromised to the point of near irrelevance. With the Fed already having made its move and desks thinning out ahead of year end, the market appetite for parsing noisy data is limited.

Asian equity markets finished the session higher, led by a 0.64 percent gain in Japan’s Topix, a 0.43 percent rise in Hong Kong’s Hang Seng, and a 0.91 percent advance in Australia’s ASX 200.

By 7:10 am, European markets were struggling for direction. Germany’s DAX was up 0.12%, France’s CAC-40 was down 0.20%, and the UK’s FTSE 100 was flat. S&P 500 futures were little changed, the US Dollar Index was softer at 97.89, and the US 10 year Treasury yield was holding at 4.146%.

EURUSD climbed to 1.1801 from 1.1756 to 1.1801 due to broad US dollar weakness. ECB board member Isabel Schnabel reiterated that euro area rates could still move higher, though she made it clear that such a shift is not imminent.

GBPUSD rallied in a 1.3459-1.3515 range, driven by broad US dollar selling. Sterling continues to draw support from a relatively firm Bank of England stance on rates alongside a more accommodative tone from the Fed.

USDJPY traded lower in a 157.08-155.66 range as concerns resurfaced that Japanese authorities may exploit thin year end liquidity to intervene. Officials continue to warn about excessive and one-sided moves.

AUDUSD traded in a 0.6655-0.6698 band and was holding near the top of that move in New York, underpinned by general US dollar weakness. Additional support came from the minutes of the December 9 RBA meeting, which were interpreted as hawkish given the discussion around the need for higher rates to maintain economic balance.