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US dollar unchanged as the US government reopens

Daily Currency Update

The US dollar is unchanged this morning after the U.S. government reopened after the longest shut down in US history. President Donald Trump signed a deal that will keep the government funded until February 15, despite there being no funding for his promised border wall. During the stalemate, Trump’s popularity sunk to an all-time low last week when Commerce Secretary Wilber Ross said that unpaid federal workers should tide themselves over with loans and couldn’t understand why they were using food banks. Eight hundred thousand federal employees did not receive paychecks during the shutdown.

The Chairman of the Council of Economic Advisers, Kevin Hassett recently said the the shutdown could reduce quarterly annualized economic growth by 0.13 percentage points for every week that it lasts. After more than four weeks, that’s the equivalent of a 0.6 percent reduction in the annualized growth rate, the Center for a Responsible Federal Budget noted.

To add more drama, President Trump said yesterday that he doesn’t believe congressional negotiators will strike a deal over border-wall funding that he could accept. He vowed that he would build a wall anyway, using emergency powers if need be.

Key Movers

The Loonie rallied almost 1 percent last Friday amid a rally of crude oil WTI and a very weak US dollar. The USD/CAD pair has touched an intraday low of 1.3203 in the overnight trading session. This morning though, the Loonie is erasing some of its gains. The USD/CAD is trading at 1.3260, an increase of 0.35 percent, animated by a decrease in the crude oil WTI price of 2 percent. Oil prices slipped on the expansion of rigs by US companies, signaling a further rise in oil supply.

The next relevant release related to the Canadian Loonie is the monthly GDP and yearly GDP report anticipated on Thursday. This morning, futures for Canada’s main stock index fell on Monday.

Technically speaking, the USD/CAD has strong support at the 1.3200 handle and strong resistance at around 1.3269.

The EUR/USD pair pushed back through 1.1400 handle on Friday against a backdrop of a weakening Greenback. It’s remained firm since and it is trading at 1.1418 this morning, a 0.1 percent increase.

The risk for the Euro, today at least, is that European Central Bank President Mario Draghi sounds dovish on monetary policy – as he did in the ECB press conference last week – when he testifies before the European Parliament at 9:00 am EST.

Later in the week, German Prelim CPI is released along with a series of European Flash GDP prints.

The GBP/USD pair pushed higher through the trading’s session on Friday, largely a result of a sell-off in the US dollar, this despite news breaking that a deal had been reached to end the US government shutdown temporarily.

Positive Brexit sentiment also played a part. Markets are increasingly pricing in less of a chance of a no-deal. The Sun newspaper reported that Prime Minister Theresa May had told her cabinet privately that she has ruled out a no-deal Brexit, which was seemingly lending further support to the Pound last Friday.

This morning the GBP/USD is falling 0.26 percent, trading at 1.3160.

Like most other currencies versus the US dollar, AUD/USD pair trended higher on Friday’s trading session. It has been steady overnight and held on to these gains while it was a public holiday in Australia. Regarding local data, traders will be looking to inflation data on Wednesday.

The NZD/USD is trading flat this morning since markets opened. With little by way of local market news, the commodity-linked currency continued to benefit amidst a backdrop of a softer Greenback.

Expected Ranges

  • USD/CAD: 1.3200 - 1.3298 ▲
  • EUR/USD: 1.1350 - 1.1444 ▲
  • GBP/USD: 1.3069 - 1.3266 ▼
  • AUD/USD: 0.7165 - 0.7200 ▼
  • NZD/USD: 0.6807 - 0.6860 ▼