The Canadian dollar is soaring. USD/CAD traded at $1.3005 on Monday and $1.2850 in early Toronto trading today. It is a "risk-seeking" world, and the Canadian dollar is riding the coat-tails of a broad-based, U.S. dollar selloff.
There are plenty of reasons for the Canadian dollar rally, although none of them originates in Canada.
Risk sentiment started turning broadly positive after Joe Biden won the U.S. election. Traders expect a kinder, gentler, diplomatic, and more professional administration, rather than the bombastic Twitter-verse of Trump.
The rapid development of apparently highly effective coronavirus vaccines, and plans to begin vaccinations in the U.K. and U.S. shortly, have pushed COVID-19 fears to the back-burner.
The U.S. Congress is reportedly working on a new U.S. COVID-19 stimulus package for delivery before year-end, which as boosted global risk sentiment, and lifted stock markets.
Risk sentiment got another shot in the arm on reports that the E.U. and U.K. will announce a trade agreement this weekend. The news has propelled EUR/USD and GBP/USD to new 2020 highs.
The Organization of the Petroleum Exporting Countries and Russia announced that they would increase crude production by 500,000 barrels as of January 1. That still leaves their combined production 1.5 million barrels/day below peak levels before the pandemic.
It is non-farm payrolls day in America. The forecast is for a gain of 469,000 jobs which is below October’s 638,000 result. There are plenty of forecasters looking for a below-consensus result.
Canadian employment is expected to rise 20,000, well below the 83,600 gain seen in October, in part because of new COVID-19 restrictions that were imposed to combat the second-wave of the virus.
GBP/USD continues to be a major focus because of Brexit. Traders are ignoring reports that France would veto a deal if they are not satisfied with fishing rights. The trade talks are continuing on the weekend.
EUR/USD continues to flirt with its 32-month peak, underpinned by the positive risk sentiment. Traders appear to be unconcerned about the ongoing COVID-19 restrictions in many parts of Europe. They are also not concerned ahead of next Thursday’s European Central Bank monetary policy meeting.
AUD/USD and NZD/USD drifted below the latest peak levels on the back of profit-taking ahead of the weekend.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
