Canadian Dollar Update, February 24, 2021 – Canadian Dollar Driving Higher
USD/CAD Open: 1.2572-76, Overnight Range: 1.2561-1.2595, Previous Close: 1.2590
WTI Oil is at $63.35 and gold is at $1,794.50. US markets are higher today.
For today, USD resistance is at 1.2533. Support is at 1.2495.
The Canadian dollar is playing “catch-up” with its antipodean cousins and is probing levels last seen in April 2018. It is benefiting from a confluence of soaring positive risk sentiment and commodity prices. It is no coincidence that the currency and the Bank of Canada Commodity Price Index (BCPI) are at three-year peaks.
Oil prices are providing an added lift to the Canadian dollar. Analysts forecast sharply higher prices for West Texas Intermediate (WTI) from its current $62.00/barrel level. OPEC, the International Energy Agency, and the Energy Information Administration are forecasting a recovery in global oil demand, while OPEC and Saudi Arabian production quotas underpin prices.
Bank of Canada Governor Tiff Macklem’s speech yesterday did not offer markets any new insight. The Governor repeated that stimulus is needed for a considerable time and said that vaccines would lead to strong growth in the second half of the year.
The Canadian dollar did not react to his speech.
Markets did react to Fed Chair Jerome Powell’s testimony to Congress yesterday, even though he merely repeated his remarks from the January 27 FOMC meeting.
His testimony was highly anticipated due to the recent spike in US Treasury yields. The rise in 10-year Treasury yields fueled expectations the Fed would be forced to raise interest rates to combat higher inflation.
Mr. Powell is not concerned. He repeated that the Fed would continue to support the economy by leaving interest rates unchanged, because the economy “is a long way from our employment and inflation goals.” He suggested that attaining those goals would take substantial time to achieve.
Wall Street stocks were deep in negative territory before Powell’s speech, then recovered to close mostly unchanged for the day. The US dollar came under pressure as well.
NZDUSD rallied following the Reserve Bank of New Zealand monetary policy statement.
The RBNZ left everything unchanged, which was expected. The gains occurred because the RBNZ did not push-back against the rise in the currency, which has climbed 3.5% in February.
GBPUSD spiked to 1.4241 in early Asia trading, then plunged to 1.4125 in NY trading. There were not any catalysts to explain the volatility.
There isn’t any data of note today, but there are plenty of Fed speakers, including Day 2 of Mr. Powell’s testimony.
Today’s Suggested Range USD/CAD: 1.2500 – 1.2600