Vaccine news derails USD momentum
Tuesday 2 February, 2021
Daily Currency UpdateCAD - Canadian DollarFor the fifth consecutive trading day, demand for the US dollar lifted USDCAD above 1.28. The pair had been trading below 1.28 since December 23 and traded between 1.27 and 1.26. Many traders are left to ask: Could momentum be in USD’s favor?Not quite. This morning, Prime Minister Justin Trudeau’s announcement that the vaccine will be produced in Montreal halted gains made overnight by USD. USDCAD hit 1.286 this morning falling to 1.281 at the time of writing.In the US yesterday, the government’s Congressional Budget Office said that the economic expansion that began in mid-2020 will continue. Specifically, real (inflation-adjusted) gross domestic product is projected to return to its prepandemic level in mid-2021.
Key MoversGBPUSD hit 1.3755 yesterday morning, the pair’s highest level since May 2018 as vaccine rollout news continued to support the pound. It has retraced a touch since, and it continued to hover around 1.37. While the pound may have dropped against the dollar, the fall compared to the euro was much more muted. Indeed, GBPEUR was headed back towards the 1.1350 handle we saw yesterday morning as the European Union’s vaccine program lags those of the UK and US. If the pace of UK vaccinations continues to curve upwards, then we should expect a strong rebound in GDP for the second quarter of this year.The Australian dollar tracked sideways through much of Monday, bouncing between support and resistance as investors continue to grapple with short term COVID headwinds. Having touched intraday lows at 0.7605 the AUD crept higher through the domestic session touching highs at 0.7662 before drifting back toward intraday lows overnight amid broader US dollar gains. While Equity markets rebounded, recouping losses suffered in the wake of the GameStop saga a shift in correlation between equity market volatility and currency market movements meant the AUD failed to capitalize on gains, instead forced lower by concerns vaccine rollouts will be delayed and US fiscal stimulus will be diluted.
- EUR/CAD: 1.540 - 1.551 ▲
- GBP/CAD: 1.748 - 1.757 ▲
- AUD/CAD: 0.971 - 0.982 ▲
- USD/CAD: 1.278 - 1.286 ▲