Canadian Dollar Update, October 23, 2020 – Canadian Dollar Grinding Out Gains
USD/CAD Open: 1.3111-15, Overnight Range: 1.3109-1.3160
WTI Oil is at $39.91 and gold is at $1,904.50. US markets are mixed today.
For today, USD resistance is at 1.3174. Support is at 1.3125.
• Bearish dollar sentiment weighs on Loonie
• Euro area PMI data raises recession concerns
• US dollar ending week with losses
The Canadian dollar underperformed against the G-10 majors this week. The currency managed to gain 0.48% since Toronto’s opening level on Monday. The New Zealand dollar was the best performing G-10 currency rising 0.90%, while the Australian dollar gained 0.56%.
The fact that Canadian dollar gains lagged those of the antipodean currencies is alarming since the Reserve Bank of Australia and the Reserve Bank of New Zealand are actively hinting at negative interest rates in the near future. Conversely, the Bank of Canada said that although negative interest rates are in their “tool-kit”, they are not on the agenda. Markets are hoping for clarity on the BoC’s outlook at next week’s monetary policy meeting.
The last US presidential debate ended without causing a ripple in global financial markets. Joe Biden has a 6 or 7 point lead in the polls, but pundits are not holding their breath.
Hillary Clinton had a 12 point lead, on October 23, 2016.
The results were reflected in global equity market activity.
Not much happened. Asia equity indexes were higher except for those in mainland China. The UK FTSE 100 is up 1.59%, leading European bourses higher and S&P futures suggest Wall Street will be around positive territory.
The equity market gains are happening even as new US COVID-19 cases surge to new highs, with over 73,000 reported yesterday. Traders are betting that a vaccine is imminent.
EURUSD rose 0.73% since Monday and consolidated those gains in a 1.1788-1.1853 range overnight. Traders ignored somewhat disappointing Euro area PMI which warned that another recession is possible. Services and Composite PMI data missed forecasts, but traders appeared to focus on the better than expected manufacturing data. EURUSD continues to be supported by broad US dollar weakness, but the ongoing EU/UK trade talk uncertainty and next week’s ECB meeting may limit gains.
GBPUSD is consolidating this week’s gains and traded in a 1.3052-1.3112 range overnight. Prices are underpinned by increased hopes for at least a water-down EU/UK trade deal which avoids a “hard-Brexit.” Traders ignored better than expected Retail Sales data because new coronavirus measures will put a damper on next month’s results.
The Canadian dollar is likely to trade sideways for this session, due to a lack of US or Canadian economic data, and from caution ahead of next week’s BOC meeting.
Today’s Suggested Range USD/CAD: 1.3070 – 1.3170