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Equity markets lift Canadian dollar

CAD - Canadian Dollar

The Dow Jones Industrial Average stopped short of 32,000 yesterday after US Federal Reserve Chairman Jerome Powell’s comments. During his testimony to Congress, Powell said that fiscal policy would continue in the short term, that inflation was not impacting policies and that the value of the dollar was relatively stable.

As the markets reached new highs on the comments, the Canadian dollar continued to flex. Weakened demand for the US dollar pushed USDCAD to fall through 1.25 and it hit 1.247 this morning. USDCAD hasn’t traded at these levels in three years, or since February 2018.

Key Movers

The euro struggled to break resistance at 1.2170 and again appears to be range-bound between 1.21 and 1.22 while Sterling continued its forward advance, touching 1.42 before edging lower through the latter stages of the daily session to rest marginally below 1.4150. Attentions remain with the reflation narrative.

There is no doubt about it, the pound is absolutely flying at the moment and continued to remain one of the top performing G10 currencies of the year. Yesterday, investors took stock of their returns with some profit-taking, which halted the pound’s advance for at least one day. Despite this, the pound remains very optimistic on the UK's vaccine rollout program and is also benefitting from a shift back towards risk in the market.

Global reflation expectations continued to steer direction through trade on Wednesday, forcing treasury yields higher and dragging the AUD through resistance at 0.7930. The AUD moved through 0.7950 overnight, marking fresh three-year highs at 0.7962 as it eyes a move toward and beyond 0.80 US cents. Commentary from Fed Chair Jerome Powell suggests the FOMC will maintain its current policy setting through the foreseeable future with expectations for inflation to remain below the 2% average for at least 3 years.

Expected Ranges

EUR/CAD: 1.521 - 1.530 ▲

GBP/CAD: 1.763 - 1.771 ▲

AUD/CAD: 0.994 - 0.999 ▲

USD/CAD: 1.247 - 1.253 ▲