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USD/CAD - Canadian Dollar Resilient

- Oil prices rise as over-supply concerns diminish

- Fed Powell confirmation hearing on tap

- US dollar opens with small losses as equity markets rebound

USDCAD Snapshot: Open 1.2639-43, Overnight Range-1.2633-1.2675, previous close 1.2680, WTI open $79.39, Gold open $1806.18

The Canadian dollar managed to grind out small gains overnight after trading erratically on Monday and closing near session lows.

USDCAD probed support in the 1.2610 area yesterday just as New York opened then reversed direction and soared to 1.2695 on the heels of free-falling US stock markets. The stock markets recovered by the end of the session, but the currency did not.

The Canadian dollar is garnering a little support from the latest surge in oil prices. West Texas Intermediate (WTI) gained 2.3% from Monday’s low after speculation that the anticipated oi glut in Q1 2022 would be far less than expected. That’s because Opec production is far lower than the latest quota’s permit and because of falling US crude inventories.

Nevertheless, it is the outlook for US interest rates that is driving Canadian dollar direction. That outlook will be on full display today as Fed Chair Jerome Powell answers questions at his confirmation hearing. Mr Powell’s opening statement was released late yesterday.

He said, “The economy has rapidly gained strength despite the ongoing pandemic, giving rise to persistent supply and demand imbalances and bottlenecks, and thus to elevated inflation. We are strongly committed to achieving our statutory goals of maximum employment and price stability. We will use our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.

Those remarks are not new. However, markets will be focused on Mr Powell’s responses to questions which are likely to include query’s as to the timing and pace of interest rate hikes.

EURUSD traded quietly in a 1.1325-1.1351 range. Trader’s ignored comments from ECB President Christine Lagarde as she merely repeated her view that rising inflation is temporary.

GBPUSD continued to grind out gains, climbing from 1.3576 to 1.3618, as EURGBP selling pressure and Bank of England rate hike risks underpinned the currency.

USDJPY drifted in a 115.13-115.45 band with prices tracking US Treasury yields and the S&P 500.

AUDUSD firmed in a 0.7170-0.7195 range, with prices underpinned by better than expected November Retail Sales, which jumped 7.3% m/m compared to 4.9% in October.

There are not any top tier US or Canadian economic data today.