Canadian Dollar Update, March 10, 2021 – Canadian Dollar Rangebound-BoC Ahead
USD/CAD Open: 1.2650-54, Overnight Range: 1.2633-1.2681, Previous Close: 1.2642
WTI Oil is at $63.52 and gold is at $1,715.50. US markets are higher today.
For today, USD resistance is at 1.2684. Support is at 1.2597.
• Global growth outlook improves according to OECD
• Treasury yields drop, boosting risk sentiment
• Canadian dollar opens near overnight peak
The Canadian dollar enjoyed a somewhat lively overnight session but, despite the volatility, opened nearly unchanged from Tuesday’s closing level.
The currency pair is being bounced about by constantly shifting US dollar sentiment, with a bit of caution ahead of today’s Bank of Canada monetary policy meeting added to the mix. The BoC meeting is a statement only affair. There is not a press conference, but official comments are expected from Deputy Governor Lawrence Schembri tomorrow.
The statement could spark a bit of a Canadian dollar rally if it alludes to the onset of tapering. Analysts have noted that the domestic data and 9.4% jump in Q4 GDP suggests that the economy is far stronger than the BoC expected and warrants an adjustment of stale guidance.
They also believe that the pending $1.9 trillion US stimulus spending bill benefits the domestic economy.
There are some concerns that the BoC’s claim that interest rates will not rise until at least 2023 is not a realistic view in light of the recent economic data.
Nevertheless, it is unlikely those fears will be addressed in today’s statement.
The Canadian dollar continues to be underpinned by firm oil prices. Last week, OPEC and Russia agreed to extend existing production cuts until May, while Saudi Arabia left its voluntary 1 million barrel/day cut intact. Analysts believe the vaccine-fueled global economic recovery will drive prices higher.
EURUSD traded down from 1.1900 at the close to 1.1870 in Asia then climbed to 1.1904 in Europe, although the bias remains negative. Prices continue to be weighed down by widening interest rate differentials favouring the US and expectations that Eurozone growth will lag America’s.
Traders are also waiting for the results of the ECB monetary policy meeting tomorrow.
GBPUSD opened unchanged from yesterday after trading in a 1.3847-1.3913 range overnight. The currency pair continues to benefit from their vaccine program, which suggests a robust post-pandemic economic rebound.
USDJPY rallied to 108.91 before retreating to 108.50, closely tracking US 10-year Treasury yield price action. The technicals are bullish above 108.000 looking for a test of 110.00.
AUDUSD chopped around in a 0.7670-0.7718 range, weighed down by US dollar demand and iron-ore price weakness. RBA Governor Philip Lowe re-affirmed that the OCR rate will remain at 0.1%. He also said that the currency was not overvalued.
US inflation data is due. February CPI is expected to rise 1.7% y/y compared to 1.4% in January. CPI, ex-food, and energy is forecast to be unchanged at 1.4%.
Today’s Suggested Range USD/CAD: 1.2600 – 1.2700