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USD / CAD - Canadian dollar attempting to recover

- Loonie attempting to recoup Tuesday’s losses

- Fed chair Powell speaks after lunch

- US dollar opens lower, AUD outperforms

USDCAD snapshot open 1.3544-48, overnight range 1.3514-1.3592, close 1.3579, WTI $80.05, Gold $1758.62

The Canadian dollar was thrashed yesterday following news that Royal Bank of Canada planned to buy HSBC Canada for $13.5 billion.

USDCAD soared from 1.3411 to 1.3644 on the news, with stop loss orders on the break above 1.3490, exacerbating the gains. However, the deal is not closing until “late 2023” and requires approval from three regulatory agencies.

USDCAD drifted lower overnight, falling from 1.3592 to 1.3411 in NY trading, partly due to fresh hopes that China eases its Covid-19 restrictions sooner than expected.

The UK Guardian reported that authorities abruptly lifted restrictions in Guangzhou and other cities, perhaps due to widespread civil unrest and international condemnation of police actions. In addition, the National health commission pledged to increase the vaccination rate of seniors.

West Texas Intermediate (WTI) oil prices rallied on the Chinese news, rising from $78.43/barrel to $80.68/b in NY. Opec has decided to have a virtual meeting rather than the usual face-to face gabfest in Vienna, which analysts suggest means no change in policy.

Canada’s Q3 real GDP rose 2.9% y/y but only rose 0.1% m/m in September. Economists suggest the results are strong enough to keep the Bank of Canada on track for a 50 bp rate hike in December.

EURUSD drifted in a 1.0320-1.0381 band. Better than expected Eurozone November inflation (actual 10% y/y, forecast 10.4%, October 10.6%) didn’t cause much of a stir, however ING economists the results suggest the ECB will only hike 50bps at the December meeting.

GBPUSD is trading near the top of its 1.1943-1.2028 range. Bank of England Chief Economist Huw Pill said the bank has “more to do” on interest rates but the terminal rate will be lower than financial markets are expecting.

USDJPY traded in a 138.34-139.04 range and is just above its session low, mainly due to positioning ahead of Powell’s speech.

AUDUSD is at the top of its 0.6672-0.6740 range supported by renewed talk that China will ease its Covid-19 restrictions.

Todays US data includes ADP Employment, Core Personal Consumption Expenditures, Q3 GDP, Chicago Purchasing Managers Index, JOLTS job openings.