USD/CAD - Canadian Dollar Supported by Firm Oil Prices

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The Canadian dollar started today's session as the best performing G-10 major currency since yesterday's New York opening level. It is not much of a feat as the currency is only 0.31% higher, and a lack of actionable economic data left markets rangebound.

The Canadian dollar received a bit of support after analysts at Bank of America Global Research raised their forecast for Brent oil to $100.00/barrel. B of A believes that pent-up demand and limited supplies will drive prices higher.

The analyst is also forecasting that West Texas Intermediate (WTI) will touch $95.00/barrel. B of A joins Goldman Sachs and Glencore in the $100.00/b prediction club.

U.S. Federal Reserve Chair Jerome Powell testifies before the Senate Subcommittee on the Coronavirus Crisis today at 2:00 pm ET. His remarks are on the Fed website.

Powell cites four reasons for the increase in inflation in recent months. It is due to "the very low readings from early in the pandemic falling out of the calculation; the pass-through of past increases in oil prices to consumer energy prices; the rebound in spending as the economy continues to reopen; and the exacerbating factor of supply bottlenecks, which have limited how quickly production in some sectors can respond in the near term."

He doesn't expect high inflation to last. He said, "As these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal."

New York Fed President John Williams believes U.S. monetary policy should remain unchanged. He said, "It's clear that the economy is improving at a rapid rate, and the medium-term outlook is very good, but the data and conditions have not progressed enough for the Fed to shift its monetary policy stance of strong support for the economic recovery."

However, Dallas Fed President Robert Kaplan and St Louis Fed President James Bullard disagree. Both men want the Fed to start tapering sooner rather than later.

EUR/USD remains on the defensive after breaking key support at $1.2000 last week. The single currency continues to suffer from contrasting monetary outlooks between the Fed and the European Central Bank (ECB). ECB President Christine Lagarde reinforced the dovish outlook saying that the ECB has room to cut interest rates further. Bank of Finland President Olli Rehn said that stimulus is still needed in the Eurozone. EUR/USD is trading with a negative bias while prices are below 1.2020.

Today's U.S. economic data releases are second-tier and not a factor for FX.

Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
Learn how KnightsbridgeFX can help you save up to 2% when buying or selling US dollars compared to your Canadian bank’s rates – click here to compare bank rates