Daily Currency Update

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The Loonie rallies due to the reopening of the Canadian economy.

CAD - Canadian Dollar

The USD/CAD pair is at 1.3877, falling 0.40 percent. The strong Loonie is driven by a weaker global US dollar index which has fallen to 0.15 at the time of this writing.

Technically speaking, the tone is bearish for the USD/CAD pair; however, there is a support area around 1.3850 - 1.3860. On the other side, there are key resistance levels at 1.3912, 1.3972, and 1.4000.

One of the drivers of the Loonie, crude oil, held close to a two-month high during the European trading session as supply curbs tighten the market and demand bounces back. Prices for oil cargoes from Brazil to Russia have increased as demand has picked up. Furthermore, Chinese consumption has returned to very close levels to before the coronavirus outbreak and Indian fuel sales have surged this month.

According to Bloomberg Economics' Andrew Husby, the federal deficit did not top 4 percent of gross domestic product during the 2008-2009 recession, but it is set to exceed 13 percent of GDP in the 2020-2021 fiscal year. Husby says Canada is more middle-of-the-pack after taking into account provincial debt levels. He added that Canada’s federal government remains in a strong position to contend with the economic impacts of the coronavirus and accompanying lockdowns. Actual borrowing needs will depend on unknowns with respect to the progress of the virus, the success of reopenings, and progress on treatments and vaccines.

Key Movers

The reality of the latest risk-on mood and movement in G10 currencies over the last few hours stems from developments towards a coronavirus vaccination by a biotech company called Modena. A small number of healthy patients were given the first doses of Moderna's coronavirus vaccine and it appeared to have generated antibody responses to the virus, according to early phase one trial data released by the company on Monday.

The British Pound had already started to tick higher after the UK announced plans for 30 billion pounds in tariff cuts after Brexit. The new-post Brexit tariff regime is set to replace the European Union’s external tariff. The GBP/USD pair is trading a bit higher at 1.2244 at the time of this writing, despite the perception that the U.K. will join the negative-rates club by the end of December 2020.

Meanwhile, Italian debt is at risk of being unmanageable and the ECB Governing Council and EU leaders have to decide if they are willing to allow a much larger transfer of Italy’s liabilities to their balance sheets. The borrowing costs continue to rise in Italy. For now, the EUR/USD pair is trading higher due to the US dollar’s weakness.

Expected Ranges

USD/CAD: 1.3850 - 1.3900 ▼

EUR/CAD: 1.5159 - 1.5250 ▼

GBP/CAD: 1.6954 - 1.7069 ▲

AUD/CAD: 0.9082 - 0.9150 ▲

NZD/CAD: 0.8440 - 0.8491 ▲