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CAD benefits from USD slide

CAD - Canadian Dollar

Real gross domestic product (GDP) grew 0.8% in September, on the heels of a 0.9% increase in August, according to data released by StatCan this morning. This fifth consecutive monthly increase continued to offset the steepest drops on record in Canadian economic activity observed in March and April.

GDP came in below the 0.9% expectation, and its not usually good for currency when the actual is less than the forecast. However, the Canadian dollar has benefited from the US dollar’s slide.

USDCAD has favored the Canadian dollar, and it traded at 1.295 this morning. USDCAD is down 2.74% in the past one month.

What gives? Several factors have pushed demand for the US dollar down. Continued investments into the stock market take money away from USD. The ongoing COVID-19 surge has weakened consumer demand. And the transition from President Donald Trump to President-elect Joe Biden won’t be completed until January 20, 2021.

Key Movers

GBP opened marginally lower yesterday after a period of intense talks between UK and EU chief negotiators ended without even a partial agreement. While most anticipate that an eleventh-hour compromise could be found, the year-end deadline is fast approaching, limiting the time needed for any deal to be ratified. While the news and gossip from the talks seemed to point towards progress being mixed, the net result throughout the day was overall optimism on a deal being reached. This combined with the news that the UK is poised to become the first western country to approve a COVID-19 vaccine, saw sterling gain briefly above the 1.34 handle against USD.

The AUD opened weaker this morning amid month end rebalancing and growing Chinese diplomatic tensions. Having extended beyond 0.74 to mark highs at 0.7407 the AUD retreated overnight, dragged lower as equities gave up gains and investors looked to square positions at month end, capitalizing on the AUD’s 4.5% appreciation throughout November. The dollar came under further pressure after an inflammatory tweet posted by the Chinese Foreign ministry saw diplomatic tensions boil over again. A doctored image posted in the wake of the Brereton report findings into Australian Special Forces conduct in Afghanistan was labelled “deeply offensive” by Prime Minister Scott Morrison. The latest spat is just another example of how rapidly the relationship has deteriorated since Morrison led calls for an independent review and inquiry into the origins of COVID-19. With little hope of a near term resolution, expectations China will continue to push its agenda via trade weighed on the AUD prompting a correction to intraday lows at 0.7345.

Expected Ranges

EUR/CAD: 1.545 - 1.559 ▼

GBP/CAD: 1.727 - 1.740 ▲

AUD/CAD: 0.952 - 0.955 ▲

USD/CAD: 1.294 - 1.300 ▲