Daily Currency Update

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Interest rates buoying Canadian dollar

CAD - Canadian Dollar

The Bank of Canada announced this morning that it will maintain its interest rates and quantitative easing. The decision should provide continued stability in the transition out of the COVID-19 pandemic.

The Canadian dollar responded appropriately. Overnight, USDCAD traded over 1.32. Since the announcement, the currency pair was headed down toward 1.31.
The decline in the US dollar was widespread this morning and supported the Canadian dollar. Equity markets were up 2%. And as we’ve seen for the last six months, the demand of the dollar has correlated with equity markets.

Key Movers

Prime Minister Boris Johnson's ongoing demands and threats to walk away from discussion if the EU does not budge put significant pressure on the pound. Internal frustration in the UK government is growing, as a senior lawyer quit over disagreements around how the withdrawal agreement should be negotiated. According to senior figures in Germany, the latest signals from London did not raise hopes for a Brexit deal.

The Australian Dollar fell through trade on Tuesday, giving up supports at 0.7260 amid a broader safe haven push. Having drifted sideways for much of the domestic session, bouncing between 0.7280 and 0.7310 the AUD corrected sharply lower overnight as US investors returned from the Labor Day long weekend and resumed last week's equity sell-off. The shift in risk sentiment through the end of last week and start of this week has seen the AUD give up 24-month highs above 0.74 to touch lows at 0.7210.

Safe haven currencies outperformed through trade on Tuesday as the rout on US and global equities continued through trade on Tuesday. The CHF, JPY and USD enjoyed strong gains as commodity and growth correlated currencies shifted sharply lower. The USD climbed off 28-month lows to post a fresh four-week-high, buoyed by a broader risk off tone and GBP correction.

Expected Ranges

EUR/CAD: 1.554 - 1.561 ▲

GBP/CAD: 1.704 - 1.721 ▲

USD/CAD: 1.315 - 1.325 ▲