The Canadian dollar posted a new 2020 high overnight. USD/CAD closed at $1.2919 then slipped to $1.2909 in Asia before rebounding to $1.2939. The Canadian dollar strength is being fueled by a resurgence of positive risk sentiment globally, sparked by the pending rollouts of coronavirus vaccines. A slate of better-than-expected Chinese economic reports in recent day’s help boost AUD/USD and NZD/USD. The Canadian dollar rallied in tandem.
Rumours of a pending Brexit deal as early as this weekend are fueling a steep rise in GBP/USD, and stoking global risk sentiment in the process. There are reports that both sides are making concessions with hopes of a trade deal announcement as early as this weekend.
GBP/USD surged on the news, rising from $1.3355 to $1.3451 in Toronto trading. That rally is helping to drive the U.S. dollar lower against the rest of the G-10 majors.
West Texas Intermediate (WTI) oil prices dropped from their overnight peak of $45.46/barrel to $44.69/b following rumours that the Organization of the Petroleum Exporting Countries plans to increase production by 500,000/barrels per day, starting in January. Prices recovered when traders realized that the planned production increase was just a quarter of the existing production cuts.
U.S. politicians are talking about another COVID-19 relief plan, and those hopes underpinned global equity indexes, and FX risk sentiment.
The U.K.’s approval of a coronavirus vaccine for emergency treatment combined with news that the U.S. plans to have completed 20 million COVID-19 vaccinations by the end of January intensified hopes for an extremely robust 2021 global economic rebound. Those hopes have driven existing coronavirus fears to the back burner despite restrictions in many European regions to combat existing outbreaks.
EUR/USD rallied on the back of broad US dollar weakness, climbing from $1.2102 to $1.2142. Traders completely ignored euro area Services Purchasing Managers Index data, and apparently are unconcerned ahead of next week’s European Central Bank monetary policy meeting. ECB officials were unhappy when EUR/USD approached $1.2000 in November, so they should be less than thrilled with EUR/USD at current levels.
It should be noted that December is known for random FX moves because many banks and funds scale back activity into year-end.
The weekly U.S. jobless claims data is on tap along with Institute for Supply Management Services report. Canada and the U.S. employment reports are due tomorrow.
