Daily Currency Update

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USDCAD hits one month high

CAD - Canadian Dollar

The Canadian dollar opened near 1.275 this morning, after demand for the US dollar pushed USDCAD to one-month highs on Thursday. Appetite for equities waned as investors looked to US dollars, chasing treasuries and the USD higher through the Asian session. This forced the USDCAD above 1.287 overnight. Yesterday’s tone has been attributed to retail investors banding together to target a selection of small cap stocks in a bid to inflict losses across several hedge funds. With suggestions the speculative moves were designed to induce a squeeze on markets, online trading platforms have been forced to introduce trading restrictions. With reports the SEC is actively monitoring further unusual activity, normal trade resumed overnight allowing risk demand to again gather pace. The CAD recouped most losses extending back toward 1.27.

Key Movers

The euro climbed back through 1.21 as German CPI jumped in January and confidence in the euro area was better than first expected. While the single currency has struggled to extend back toward highs at 1.23, it remains relatively well supported above 1.20 for now. The big test for the common currency lies ahead with growth forecasts suggesting the continent will be slow to recover from the COVID-19 pandemic, left behind by the UK and US, as disparities in vaccine roll outs begin to emerge.

Sterling benefitted from data outside the UK yesterday. GBPUSD touched 1.3635 at the lows yesterday morning but recovered to 1.3745 after the GDP release.

While the AUD has recouped Wednesday’s equity market drop, the break opened the door for a change in the broader narrative. With the currency struggling to extend beyond 0.78 US cents and the run of higher highs and higher lows now over, we anticipate the AUD will remain range bound with extensions toward 0.7820 rebuffed and contractions approaching 0.75 supported. With the broader narrative largely unchanged through the last month, we are looking to any signal that may force a shift in investor outlook as the catalyst to break direction.

Expected Ranges

EUR/CAD: 1.547 - 1.557 ▲

GBP/CAD: 1.748 - 1.764 ▼

AUD/CAD:0.979 - 0.985 ▼

USD/CAD: 1.274 - 1.287 ▲