Canadian Dollar Update, January 13, 2021 – Canadian Dollar Trading Higher
USD/CAD Open: 1.2733-37, Overnight Range: 1.2703-1.2747
WTI Oil is at $53.31 and gold is at $1,860.10. US markets are mixed today.
For today, USD resistance is at 1.2781. Support is at 1.2691.
• Fed speakers push back against tapering talk
• ECB officials upbeat on economy, pay lip service to currency
• US dollar opens on a mixed note
The Canadian dollar traded sideways in an uneventful overnight session. It managed to outperform against AUDUSD and NZDUSD, thanks to rising crude oil prices. West Texas Intermediate (WTI), the North American benchmark, extended this week’s gains and climbed to $53.70/b. Oil prices continue to be supported by Saudi Arabia’s million barrel/day production cut that starts February 1 and shrinking US crude inventories. The American Petroleum Institute reported that crude stocks fell 5.8 million barrels in the week ending January 8.
Canadian dollar traders do not seem concerned about the latest coronavirus developments in Canada. Ontario announced another State of Emergency, effective Thursday, that severely restricts business activity and demands citizens stay home and only leave for necessities. Lockdown measures are in place in other regions as well.
FX traders are not worried. Perhaps they should be. Canada will not have vaccinated its population until September at the earliest.
Meanwhile, other G-10 majors are aggressively rolling out vaccination programs, meaning Canada will be at a disadvantage, and economic growth may lag that of its competitors.
Fed officials are pushing back against market talk of an early start to tapering of Quantitative Easing purchases. Kansas City Fed President Ester George said that the Fed needs to achieve its inflation and employment goals before adjusting QE policy. Her comments were echoed by other officials and helped to halt the latest Treasury yield rally.
US presidential political dysfunction is just a distraction for FX traders. They are more interested in Joe Biden’s multi-trillion dollar stimulus plans which are expected to be detailed on Thursday. The plan’s key parts have already been leaked, which risks a “Buy the rumour and Sell the news” reaction.
EURUSD traded in a 1.2208-1.2220 range in Asia then dropped to 1.2163 in Europe after ECB official Francois Villeroy reminded traders that the central bank is monitoring the rise in EURUSD. President Christine Lagarde said “Economic projections from December are clearly plausible and the assumptions underlying the forecasts are still correct. Forecasts are premised on the assumption that lockdown measures will be imposed until the end of Q1.”
GBPUSD extended yesterdays’ gains, climbing to 1.3700 from 1.3663. The gains were on the back of Bank of England Governor Andrew Bailey’s comments suggesting that UK rates would not go negative.
US CPI is expected to rise to 0.4% m/m in December, from 0.2% in November, due to higher energy prices.
Today’s Suggested Range USD/CAD: 1.2680 – 1.2780