Home Daily Commentaries Canadian dollar diverges from equity markets

Canadian dollar diverges from equity markets

Daily Currency Update

CAD - Canadian DollarFor the past 10 months, and maybe even longer, the value of the Canadian dollar has aligned with equity markets. As the S&P tanked with the first COVID-19 lockdowns in March of 2020, the demand for CAD shrank. As equity markets roared back to life, we watched the USDCAD favor the northern neighbor. So much so, that the Bank of Canada began to include equity markets in its evaluations of CAD.Well, is this trend over? For the last 6 trading days, equity markets have declined. And demand for USD has declined, priming the pump for USDCAD to favor Canadians. USDCAD hit its lowest level (translation: good for CAD) since April 2018.The convergence of a few factors can be attributed to CAD’s strength. First, commodity prices have gained considerable strength in anticipation of an economic recovery. Second, US Treasury Yields have also increased.

Key Movers

The pound has managed to shrug off concerns around the labor market yesterday and continue to eke out gains against both the USD and EUR. Indeed, at one point overnight, when liquidity was thinner, GBPUSD managed to surge 100 points due to several options being triggered before retracing back down to the mid-1.41s. Despite this though it is remarkable how easily the pound has moved through GBPUSD 1.39 up to 1.41+ and GBPEUR 1.14 to 1.16+. Regarding the labor market it was mixed news yesterday for the UK. While unemployment hit the highest level in 5 years there are signs that more and more people are being added back to the payroll an indication that the labor market is stabilizing.The Australian dollar held onto gains above 0.79 US cents through trade on Tuesday, in what was otherwise a largely lackluster session. Having touched highs at 0.7929, the AUD tracked sideways through much of the day and struggled to extend beyond resistance at 0.7930 while maintaining an equally narrow band against key crosses. Investors looked to capitalize on Monday’s advance, squaring positions as risk flows faltered and equities fell.

Expected Ranges

  • EUR/CAD: 1.522 - 1.531 ▲
  • GBP/CAD: 1.768 - 1.785 ▲
  • AUD/CAD: 0.994 - 0.998 ▲
  • USD/CAD: 1.255 - 1.261 ▲