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The Loonie falls after announcements by Trump and as we await tomorrow’s BoC monetary policy update

CAD - Canadian Dollar

The Loonie is falling this morning in sync with equity markets. The Loonie usually goes lower when the perception of risk in the capital market is high. This is why the most critical FX pair in North America, the USD/CAD, is rising 0.08 percent, trading at 1.3318 (weaker Loonie). Furthermore, the Loonie is losing 0.5 percent against the Pound, 0.3 percent versus the Aussie dollar, and 0.1 percent versus the Yen.

As you will see below in the "key movers" section, the Aussie dollar and Pound have their own idiosyncratic drivers, but, in North America, the main driver for the Loonie is US President Donald Trump. The North American capital market got hit again after Trump hinted at a delay in the trade deal by mentioning that he is prepared to wait for the U.S.-China trade deal. Furthermore, by the end of the trading day yesterday, Trump proposed duties on French goods over a tech tax, which added to the negative mood when he restored tariffs on steel from Brazil and Argentina yesterday. Additionally, he threatened to increase levies on Chinese goods if a phase one deal can't be reached between the US and China. This situation is creating anxiety in the FX market. Crude oil is falling almost 1 percent this morning, and market participants are waiting for the BoC rate statement tomorrow morning.

Technically speaking, the USD/CAD pair is trading at a significant resistance, but if it is broken to the upside, given the current market mood, it has space to get close to the 1.3400 handle. On the other side, if the risk-on environment comes back, and/or crude oil bounces and/or the BoC is less dovish than expected tomorrow, the USD/CAD has space to fall by at least 100 pips and even 200 pips towards the 1.3100 handle (the Loonie would be stronger than the Greenback).

Key Movers

The Aussie dollar climbs to a three-week high after the central bank leaves rates unchanged and says some global risks have eased recently. The Australian central bank -RBA- sees price pressures picking up gradually to around 2 percent in 2020 and 2021. Intermediately after the RBA announcement, the AUD/USD pair jumped from 0.6818 towards 0.6862, a 1-month new high, representing a 0.64 percent increase, leaving its growth and inflation forecasts unchanged.

The British Pound continues to trade higher, the GBP/USD pair trades at the 1.3000 handle representing a 0.45 percent increase. It appears as though it is trying to reach the October 21st high of 1.3013. The main driver is a polling consistently showing the Tory's are looking likely to get a majority at next week's general election. Furthermore, today starts two days of NATO meetings being hosted in the UK with US President Donald Trump in attendance; however, it is likely to be general election news/polling that will have the most impact on the Pound.

In the Euro Zone, industrial producer prices increased by 0.1 percent, while 0 percent was expected. The EUR/USD pair was trading flat after the announcement, probably because it had already gone higher yesterday due to the risk-off environment. ECB President Christine Lagarde said in her first testimony to the EU parliament that the ECB would be determined in hitting its inflation mandate and added that an upcoming strategy review would be "open-minded."

Expected Ranges

USD/CAD: 1.3293 - 1.3333 ▲

EUR/CAD: 1.4713 - 1.4773 ▲

GBP/CAD: 1.7263 - 1.7323 ▲

AUD/CAD: 0.9073 - 0.9130 ▲

NZD/CAD: 0.8633 - 0.8693 ▲