Daily Currency Update

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Canadian dollar makes gains

CAD - Canadian Dollar

Demand for the Canadian dollar stabilized overnight despite oil prices falling to below US$40 a barrel overnight. The Canadian dollar benefited from traders expanding their portfolios and equity markets rising.

Yesterday, the Bank of Canada expanded its corporate bond buying program to include buy-side participants. The move was meant to support liquidity and proper functioning of the corporate debt market. The amendment would allow money managers to participate in the corporate bond buying program.

Equity markets rose despite President Donald Trump backing out of economic stimulus negotiations with congressional Democrats. The move was abrupt and contrary to Federal Reserve Chairman Jerome Powell’s recommendation for additional aid.

Key Movers

The day began well for UK-EU negotiators finding common ground on smaller issues, such as benefits and social security. The two parties are still yet to agree on issues including fisheries and to what extent the UK legislation must align with the EU, which are both large roadblocks. Officials from the EU have been quoted saying that “a deal is possible, but not guaranteed”, however this is still a positive sign, considering the contradictory statements given over the past months from EU officials. It is now just over a week until Johnson’s self-imposed deadline, and there is still a lot to do. The general market consensus is that an extension will be granted.

The Australian dollar tracked lower through trade on Tuesday, giving up 0.72 US cents amid dovish Royal Bank of Australia expectations and a consolidation across equities and risk assets. Having drifted sideways through much of the domestic session the AUD enjoyed a brief upward turn in the wake of the RBA’s policy meeting and rate statement. Policymakers elected to leave interest rates at 0.25% allowing the AUD to jump through 0.72 to touch 0.7210 before a suitably dovish statement paved the way for a 15-basis point cut and additional Quantitative Easing measures come November. The promise of lower interest rates and a QE program targeting 5- and 10-year bonds forced the AUD lower, driving a half-cent decline to 0.7150. Having consolidated at this handle the Australian dollar came under added pressure as risk sentiment flat lined following confirmation President Trump and Republicans have withdrawn from Coronavirus relief talks.

Expected Ranges

EUR/CAD: 1.561 - 1.565 ▲

GBP/CAD: 1.709 - 1.719 ▼

AUD/CAD: 0.945 - 0.949 ▲

USD/CAD: 1.326 - 1.334 ▲