Home Daily Commentaries The US dollar continues trading within a tight range amid financial market volatility

The US dollar continues trading within a tight range amid financial market volatility

Daily Currency Update

The USD continues to trade within a tight range despite several factors: Treasury Secretary Mnuchin spooking markets by calling bank CEOs; Trump contemplating firing Powell; the government shutdown that doesn’t appear to have an end in sight; Mattis resigning with some parting shots; and, the Fed hiking rates while the market is in free fall.

The US dollar index had a rally, at one point of 0.54 percent amid the best day in US equity markets in nearly a decade yesterday, with the Dow Jones Industrial Average notching its largest one-day point gain in history. Rallies in retail and energy shares led the gains, as Wall Street recovered the steep losses suffered in the previous session.

This morning though recent trends were back once again with risk appetite on the weaker side in the financial markets. The US dollar index is dropping 0.20 percent, nearly erasing its prior day gains, while haven currencies such as the Japanese Yen and Swiss Franc are strengthening.

Key Movers

The Loonie was helped by the strong recovery witnessed in crude oil prices of around 9 percent yesterday. This morning the Loonie retreats from highs and is touching new 19-month lows against the Greenback at 0.7335 (USD/CAD highs at 1.3633). The US dollar and the USD/CAD are highly uncorrelated these days, with global equity markets falling to their lowest level since 2008. Fear in the financial markets has made the Canadian dollar less attractive as investors stick with safe-haven assets.

There won't be any macroeconomic data releases from Canada during the remainder of the week and investors are likely to continue to follow crude oil prices and market sentiment closely.

The Euro is bouncing 0.42 percent due to a weak US dollar lifting the EUR/USD pair to 1.1407 this morning. The Italian parliament will vote on the budget by December 29th, maintaining the deadline for budget approval by the end of this year.

The GBP/USD pair is trading sideways this morning at 1.2634 within a tight range of 1.2615 – 1.2666. The Christmas holiday-thinned trading is expected to keep the Pound in the current trading range.

A sharp rally in U.S. stocks yesterday bolstered global risk appetite as retail companies showed good numbers, prompting strong gains in high-beta currencies such as the Aussie dollar.

Reports of another round in U.S.-China trade talks for early January pushed the AUD/USD to highs at 0.7077 heading into the New York close. However, the AUD/USD pair is retracting at 0.7039 this morning.

The NZD/USD pair is trading 0.40 percent lower against the US Dollar at 0.6702 this morning after a quiet European and Asian trading session over the holiday season. Traders are drifting back to their desks ahead of the weekend and New Year celebrations around the corner.

Expected Ranges

  • USD/CAD: 1.3600 - 1.3662 ▲
  • EUR/USD: 1.1355 - 1.1423 ▲
  • GBP/USD: 1.2618 - 1.2666 ▼
  • AUD/USD: 0.7022 - 0.7069 ▼
  • NZD/USD: 0.6692 - 0.6715 ▼