Daily Currency Update

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Canadian dollar extends gains

CAD - Canadian Dollar

The Canadian dollar kept pace with equities, emerging market and commodity led currencies on Tuesday, capitalizing on broad based US dollar weakness and a sustained run of positive market sentiment.

The government’s C$100 billion economic stimulus package was overshadowed by Washington’s relief package. Vaccine hopes and the promise of fiscal stimulus spurred a rally across equity markets with the S&P 500 and NASDAQ both up over 1%.

USDCAD marked fresh one-year lows and the pair was unable to extend below 1.29.

Key Movers

The euro surged through 1.20, advancing 1% to touch highs at 1.2075, a two and a half-year high. The single currency surged amid rumors Brexit talks were now entering the final stages. With the euro breaking psychological resistance at 1.20 and extending beyond the handle, the door is now open for the currency to extend gains toward 2018 highs at 1.25.

GBP jumped higher against most of its major peers through overnight trading amid speculation that the UK and EU Brexit talks have entered the mythical ‘tunnel.’ Intensive talks among a small core of negotiators could be carried out in total secrecy with the aim of hammering out a deal away from the prying eyes and loud objections of onlookers. This news combined with broad USD weakness saw GBPUSD hit an intra-day high of 1.3440, its highest level since September 2020.

AUD failed to keep pace with equities, emerging market and commodity led currencies on Tuesday, unable to capitalize on broad based US dollar weakness and a sustained run of positive market sentiment. Vaccine hopes and the promise of US fiscal stimulus spurred a rally across equity markets with the S&P 500 and NASDAQ both up over 1%. Despite the USD marking fresh 2 ½ year lows the AUD was unable to extend beyond resistance at 0.7370/0.74. Having ignored the RBA’s monthly monetary policy meeting it appears markets were reluctant to trace AUD gains in the face of increasing diplomatic and trade tensions with China. China has levied several trade restrictions against Australian exports over the last 6 months weighing on the AUD and perhaps taking the sheen off some positive sentiment driving other commodity currencies higher. While the restrictions have yet to filter through to key exports like iron ore the impact of reduced activity with the world’s second largest economy continues to dampen the near-term outlook.

Expected Ranges

EUR/CAD: 1.557 - 1.565 ▼

GBP/CAD: 1.720 - 1.738 ▲

AUD/GBP: 0.951 - 0.956 ▲

USD/CAD: 1.291 - 1.295 ▲