Home Daily Commentaries CAD on the backfoot to start month

CAD on the backfoot to start month

Daily Currency Update

CAD - Canadian DollarThe Canadian dollar started the month in a weaker position compared to the US dollar. In overnight trading, CAD was stronger than the USD, but as trading continued through the morning, we saw USDCAD climb from 1.276 toward 1.283 at the time of writing.After 7 months of continued decline in the demand for the US dollar, could demand be climbing up again? That’s the question traders have posed recently. Since December 21, the US Dollar Index, which measures a basket of currencies against USD, has been below 90 point. For the first time since late December, the US Dollar Index nearly touched 91 points. So, what gives?A few factors could be contributing to the increase in demand. First, equity markets last week rose largely on the backs of the GameStop short squeeze. While a small group of investors used cash to purchase equities, more investors may have wanted US dollars. Second, the US dollar could be undervalued, and investors see an opportunity plain and simple. Third, could equity markets be fearing a larger sell off? If that’s the case, then investors will be exiting markets and seek cash.

Key Movers

The row between the European Union and AstraZeneca over its COVID-19 vaccination allocation seems to have cooled somewhat with the British/Swedish pharmaceutical giant promising the bloc an additional 9 million doses by March. This will bring the amount allocated by AZ to the EU to around 40m if it comes through, although this is still well short of the 80m the EU had been expecting. The issue came to a head on Friday when the EU threatened to stop the export of vaccines to the UK, however it quickly backtracked amid pushback when it emerged that Irish Prime Minister Michael Martin hadn't even been notified of its intention to do so.Great British pound started February on the front foot. The pound benefited from yet more positive COVID-19 vaccine news over the weekend. The UK announced just under 600k had received their first jab on Saturday a new daily record which puts the government on course to achieve its target of 15m people from the most vulnerable parts of society getting their first injection by February 15th. Looking ahead, the Bank of England releases its first interest rate decision of the year on Thursday. The main talking point will be any discussion of the bank imposing negative rates. Cold water appeared to be poured on the idea by BoE Governor Andrew Bailey last month and those betting on a sterling rally will be hoping that the encouraging news re: the vaccination program puts the idea to bed once and for all.The Australian dollar closed the week weaker when valued against the Greenback weighed by a fall in US equities on Friday. On the data front last week, we saw the release of December Westpac Leading Index, which contracted to 0.12% form 0.69%. Inflation in the country was up by 0.9% YoY in the last quarter of the year. While Business Confidence contracted from 13 to 4 in December, according to NAB. Looking ahead this week on Monday and we will see the release of AIG Manufacturing Index and ANZ Job Advertisements m/m for the month of January. On Tuesday, all eyes will be on the Reserve Bank of Australia interest rate decision which is forecast to remain at 0.10%. On Wednesday we will see the release of monthly Building Approvals m/m and the AIG Construction Index. Finally, on Thursday we will see the release of NAB Quarterly Business Confidence and monthly Trade Balance figures.

Expected Ranges

  • EUR/CAD: 1.545 - 1.553 ▼
  • GBP/CAD: 1.751 - 1.757 ▼
  • AUD/CAD: 0.974 - 0.978 ▼
  • USD/CAD: 1.276 - 1.283 ▼