Canadian Dollar Update, March 9, 2021 – Canadian Dollar Recovers Lost Ground
USD/CAD Open: 1.2606-10, Overnight Range: 1.2593-1.2684, Previous Close: 1.2665
WTI Oil is at $64.55 and gold is at $1,717.60. US markets are higher today.
For today, USD resistance is at 1.2649. Support is at 1.2595.
• Global growth outlook improves according to OECD
• Treasury yields drop, boosting risk sentiment
• Canadian dollar opens near overnight peak
The Canadian dollar was on the defensive in Asia, in part because of the mixed close on Wall Street. The Dow Jones Industrial Average closed with record gains but the Nasdaq and S&P 500 lost ground. China’s Shanghai Shenzhen CSI 300 index got slammed, dropping 2.15%, on top of the 3.2% loss on Monday. However, the other major Asia indexes did not suffer the same fate.
Risk sentiment turned positive at the European open as US Treasury yields started to slide. The 10-year Treasury yield dropped to 1.52% from 1.60%, with the move being attributed to position adjustment ahead of a sizeable Treasury auction that begins today.
The plunge in yields fueled Canadian dollar demand. USDCAD fell to 1.2593 from 1.2684 as prices tracked broad US dollar sentiment against the majors. The sell-off saw added pressure from steady to firm oil prices. West Texas Intermediate has a bullish bias. Traders are unconcerned ahead of Wednesday’s Bank of Canada monetary policy meeting. There will not be a press conference that suggests policy and guidance will be unchanged.
The Organisation for Economic Development and Cooperation (OECD) contributed to the positive risk tone in FX markets. They boosted their 2021 global GDP growth forecast to 5.6%.
The interim statement said: “Activity in many sectors has picked up and partially adapted to pandemic restrictions. Vaccine rollout, although uneven, is gaining momentum, and government stimulus, particularly in the United States, is likely to provide a major boost to economic activity. But prospects for sustainable growth vary widely between countries and sectors. Faster and more effective vaccination deployment across the world is critical. Prospects have improved over recent months, with signs of a rebound in goods trade and industrial production becoming clear by the end of 2020.”
The OECD predicts Canada’s 2021 GDP growth will be 4.4%.
EURUSD bounced from 1.1837 to 1.1915 on the back of the drop in Treasury yields. Yesterday, US Treasury Secretary Janet Yellen said that the stimulus plan would drive a very strong recovery. She said the Fed had tools to deal with rising inflation, so she wasn’t concerned.
The US dollar opened in NY, broadly lower from yesterday’s close. FX direction will be dictated by bond traders as there are no Canadian or US economic reports due today.
Today’s Suggested Range USD/CAD: 1.2560 – 1.2660