Daily Currency Update

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Are CAD and equity markets still friends?

CAD - Canadian Dollar

The Canadian dollar, which has been closely tied to the value of equity markets as of late, returned to an old habit. Demand for CAD fell for a fourth day as oil extended its decline and US equity markets gained.

The USDCAD has been linked so much so this year that we’ve seen the CAD rise with equity markets. The Bank of Canada announced at its last meeting that it would begin to include weigh equity market contributions to the value of the CAD.

Since Monday’s positive news from Pfizer regarding the success of its vaccine, the CAD has not been along for the equity market ride. It could be that demand for the CAD reached a two-year high and there’s a bit of profit taking.

Key Movers

The euro outperformed yesterday, extending back beyond 1.18 despite a contraction in industrial production. A broader risk asset sell-off appears to have helped the single currency as investors chased the world’s most liquid currency pair.

The Great British pound was the day's worst performer down almost 1% following a weak Q3 GDP print. While data was largely in line with expectations the UK economy has been devastated by COVID-19 and is still some 10% softer than before the pandemic. With new nationwide restrictions now in play as daily case numbers grow at an exponential rate there is little hope for a Q4 recovery. Sterling holds onto gains above 1.30 and currently buys 1.3118.

Having failed to break above 0.73, the AUD drifted lower through trade on Thursday as market demand for risk soured amid what seems to be profit taking and general investor caution. Having tested a break above resistance at 0.7290 earlier this week the AUD struggled to maintain momentum, dragged down by a broader risk asset sell off. Markets seemed keen to capitalize on recent gains, taking profit having amended near term economic expectations. While a successful COVID-19 immunization program will ultimately allow the global economy to rebuild, logistical and distribution challenges mean broad cross-sections of the community are unlikely to gain access a COVID-19 vaccine until late 2021, meaning short term challenges remain in play.

Expected Ranges

EUR/CAD: 1.548 - 1.557 ▼

GBP/CAD: 1.721 - 1.734 ▼

AUD/CAD: 0.949 - 0.954 ▼

USD/CAD: 1.311 - 1.316 ▼