The Canadian dollar continued to consolidate this week’s gains in an uneventful and quiet overnight session. USD/CAD traded narrowly in a $1.2993-$1.3012 range and is trading in Toronto in the middle of that band.
The Canadian dollar is benefiting from widespread, positive risk sentiment, which has led to substantial gains in AUD/USD and NZD/USD. The news of successful coronavirus vaccine tests unleashed a torrent of demand for the so-called “risk assets,” and helped to send crude oil prices skyrocketing.
West Texas Intermediate (WTI) the North American crude oil benchmark price touched $46.20 yesterday, a 37% increase from where it was at the start of November. The Organization of the Petroleum Exporting Countires and friends played a large role in the price surge after they leaked plans to extend existing production levels until March 2021.
AUD/USD and NZD/USD led the move higher because of their close trade relationship with China and are seen as proxies for risk sentiment.
Australia and New Zealand’s are major sources of raw materials for China.
Yesterday, there were a large number of top-tier U.S. economic reports released as well as the minutes from the November 5 meeting. The minutes were largely ignored because they didn’t offer any fresh insight.
The economic data was modestly soft. Q3 Gross Domestic Product was unchanged at 33.1%, which was the extent of the good news. New home sales fell 0.3%, consumer sentiment dropped 4.9 points, and personal income declined 0.75 in October. The latest surge in COVID-19 cases in America is taking a toll on the economy as seen by the 30,000 increase in weekly jobless claims.
Nevertheless, hopes that a coronavirus vaccine will soon be available should the U.S. data to the back-burner.
GBP/USD traded sideways in a $1.3344-$1.3397 range supported by hopes for a Brexit trade deal, which if it occurs could lift GBP/USD to $1.4000. Yesterday, the Chancellor of the Exchequer unveiled a "mini" budget, which had little impact on trading.
EUR/USD spent the overnight session trading in a $1.1903-40 range but profit-taking in the early Toronto session knocked prices to $1.1886.
News that Germany plans to extend coronavirus restrictions until January is weighing on prices.
The Canadian economic calendar is empty. FX action will be quiet due to the U.S. holiday.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
