Daily Currency Update

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CAD continues to strengthen

CAD - Canadian Dollar

The Canadian dollar finished off another week with higher demand than the US dollar, hitting a 31-month low against USD. The hot streak continued. USDCAD fell below 1.28 overnight and traded as low as 1.277.

Demand for the US dollar waned last week while traders pushed equity markets higher. Driven by vaccine headlines, optimism for a covid-free future carried the day. The optimism pushed risk and investors have expanded into other treasuries and currencies, benefiting CAD and AUD.

Looking ahead, the euro and Great British pound will be driven by outcomes of Brexit negotiations. The Australian dollar, which has soared to above 0.74, could be impacted by further Chinese tariffs in that country’s trade war.

Key Movers

Over the weekend Brexit negotiations took a turn for the worse with fishing rights, governance rules, and future dispute resolution all remaining sticking points for a deal to get done before the end of the year. The EU’s chief negotiator, Michel Barnier, was downbeat as to the prospect of an agreement He said that the ball was now in UK Prime Minister Boris Johnson’s court. Investment bank JP Morgan stated that their predicted percentages for a UK-EU deal have worsened from 20% to 30%. Meanwhile Irish Prime Minister Michael Martin was less confident and said that he believes the deal was closer to 50-50. The uncertainty of a deal being agreed, so close to the deadline, has knocked the pound this morning.

GBP had been trading higher against a basket of currencies with the recent vaccine headlines and an improved outlook on Brexit negotiations. Friday, GBPUSD had been trading as high as 1.3540 but this morning the currency pair has fallen below 1.3250. GBPEUR has also fallen, dropping below 1.1000. There is little macro-economic data today, so eyes will remain firmly on Brexit updates for guidance on GBP movement.

The Australian dollar finished another week with solid gains beyond 0.74 US cents, hitting a 28-month high, against the Greenback. The Aussie dollar last week traded between 0.7340 and 0.7448 urged on by a positive shift in demand for risk, amid hopes of a vaccine. Looking ahead this week and on Monday RBA Governor Philip Lowe will deliver a speech titled "Innovation and Regulation in the Australian Payments System" at a webinar hosted by the Australian Payments Network. On the data front we will see the release of the Australian Industry Group (AIG) Performance of Services Index and monthly ANZ Job Advertisements. On Tuesday we will see the release of quarterly House Price Index (HPI) and the monthly NAB Business Confidence Survey. Finally, on Wednesday all eyes will be on the Westpac Consumer Sentiment Survey. China will release its November Trade Balance and inflation data for the same month. From a technical perspective, the AUD/USD pair is currently trading at 0.7392 We continue to expect support to hold on moves approaching 0.7370 while now any upward push will likely meet resistance around 0.7440.

Expected Ranges

EUR/CAD: 1.548 - 1.556 ▼

GBP/CAD: 1.697 - 1.717 ▲

AUD/CAD: 0.946 - 0.953 ▼

USD/CAD: 1.277 - 1.282 ▲