- CAD stays softs even as commodity currencies rally
- Global risk sentiment turns positive
- Canada Retail Sales ahead
USDCAD Snapshot: Open 1.2935-39, Overnight Range 1.2916-1.2946, Previous close 1.2944, WTI open $69.62, Gold open $1796.11
The Canadian dollar remains on the defensive even as the antipodean currencies rebound on improved risk sentiment. USDCAD bounced in a 1.2916-1.2946 range overnight, well inside an uptrend channel that has guided prices higher since the beginning of November.
Canadian consumers are expected to have opened their wallets in October with Retail Sales forecast to rise 1.0% m/m compared to the September decline of 0.8% m/m. The news should not have much if any impact on the Canadian dollar as its direction continues to be determined by global risk sentiment.
The Canadian dollar selling pressure has been exacerbated since the Bank of Canada delivered a somewhat dovish monetary policy statement on December 8. Prior to the meeting, traders expected policymakers to acknowledge that surging inflation would lead to an earlier than expected interest rate increase. It didn’t happen. Instead, the BoC seemed blissfully neutral. Traders unwound short USDCAD positions, and the currency pair has traded with a bid since.
Sliding oil prices continue to weigh on the loonie. West Texas Intermediate plunged alongside the surge in Omicron variant cases as analysts downgraded global growth outlooks and crude demand. West Texas Intermediate (WTI) was above $85.00/b in November and analysts from Goldman Sachs and JP Morgan were forecasting prices of $100.00/barrel or more in January. They dropped 26% by December 6, and have spent the past two weeks bouncing between $65.00/b and $73.00/b. The Canadian dollar seems to have a bigger reaction to oil price declines than rallies, but that is likely a factor of year-end markets.
EURUSD has been in a 1.1180-1.1380 range since November 22 and is trading with a negative bias below 1.1340. ECB speakers reinforced divergent Fed and ECB outlooks today and are the key factor weighing on the single currency. However, fears of a power crunch in the Eurozone slowing growth are another factor. A slew of EU green energy policies over the years have increased the Eurozone’s reliance on gas from Russia, and Russia is not playing nice due to EU sanctions, NATO, and Ukraine.
GBPUSD rebounded from yesterday’s 1.3180 low, rising to 1.3261 in Europe due to the revival in positive risk sentiment. However, gains may be limited as the government debates imposing a rash of new restrictions to combat the Omicron outbreak in the UK. GBPUSD remains bearish below 1.3360.
USDJPY traded quietly in a 113.57-113.77 range, supported by the US 10-year Treasury yield rise.
AUDUSD rallied with the change in risk sentiment, rising from 0.7100 to 0.7139. The RBA minutes reaffirmed the central bank’s upbeat outlook even with Omicron. NZDUSD followed suit.
The US data calendar is empty.
