Canadian Dollar Update, March 16, 2021 – Canadian Dollar Consolidating Gains
USD/CAD Open: 1.2483-87, Overnight Range: 1.2472-1.2499, Previous Close: 1.2472
WTI Oil is at $64.50 and gold is at $1,730.30. US markets are mixed today.
For today, USD resistance is at 1.2491. Support is at 1.2443.
• EURUSD supported by German ZEW data
• US Retail Sales, Industrial Production due today
• US dollar opens with small gains but retracing moves in early NY trading
The Canadian dollar traded sideways as FX traders were cautious ahead of Wednesday’s FOMC meeting. The domestic currency is on a roll thanks to firm oil prices and collateral benefits from the US $1.9 trillion stimulus package.
FX markets were cautiously optimistic overnight, in part due to buoyant global stock markets, firm commodity prices and expectations of a dovish FOMC outlook. The Fed is expected to look past the spike in inflation which is caused by “base effects”, meaning inflation was extremely low due to the pandemic. The Fed will continue to dwell on employment concerns as Fed Chair Jerome Powell believes the unemployment data does not accurately reflect the true level of unemployment.
Another key focus is if the Fed addresses the Supplemental Leverage Ratio (SLR). Briefly, the SLR is a measure of capital adequacy used by the Fed to measure, in percentage terms, a bank’s ability to take losses on its assets.
At the height of the pandemic last year, the Fed announced that they would temporarily exclude US Treasuries and bank deposits with the Fed from the calculation. They believed it allowed the banks to boost lending during the pandemic. The program ends March 24.
There are many issues around SLR that are complicated. However, some analysts fear that ending the program will force traders to sell Treasuries and drive up interest rates.
EURUSD caught a bit of a bid after German ZEW data was better than expected. Economic sentiment rose 5.4 points to a new reading of 76.6 points compared to February. Expectations for a dovish FOMC are also underpinning prices, which rose from 1.1915 to 1.1950 in NY.
GBPUSD dropped from 1.3902 to 1.3810, on the lingering fall-out from BoE Governor Andrew Bailey’s dovish comments yesterday.
AUDUSD dropped to 0.7712 from 0.7754 after the RBA minutes, which were considered more dovish than expected.
There are plenty of US economic reports, but the looming FOMC meeting suggests the data will be ignored. February Retail Sales are expected to fall 0.5% due to the impact of the major Texas storm. Industrial Production is expected to rise 0.6%, a tad softer than the 0.9% in January, while Capacity utilization may remain unchanged.
Today’s Suggested Range USD/CAD: 1.2430 – 1.2530