The Canadian dollar continues to bounce between USD/CAD support at 1.2690 and resistance at $1.2790. FX traders traded cautiously overnight ahead of this afternoon’s U.S. Federal Open Market Committee (FOMC) meeting.
The Fed is widely expected to leave rates and policy unchanged because of the January surge in new coronavirus cases and the prospect of massive fiscal stimulus form the Biden Administration. Fed Chair Jerome Powell reiterated his mantra of "low rates for a long time," earlier this month, and the plans for a $1.9-trillion government spending plan, will ensure the Fed sticks to its wait-and-see approach.
The looming FOMC meeting had other asset markets on the defensive.
Asia equity indexes closed on a mixed note. European bourses are lower, and so are crude oil and gold prices.
EUR/USD broke below minor support at $1.2120 which set the stage for additional losses to the $1.2050 area. Weaker than expected German Consumer Confidence didn’t help sentiment, although a soft report was expected due to recent lockdown measures in the country.
Verbal currency intervention by an European Central Bank board member exacerbated negative sentiment. Klaas Knot said that the central bank had plenty of tools available to limit euro gains if those gains had a negative impact on inflation.
GBP/USD rallied to $1.3758 in early European trading before plunging to 1.3698 in New York. Prices appear to be supported by post-Brexit demand for British assets and the U.K’s outperformance in the vaccination sweepstakes. Britain has delivered 10 doses for every 100 people, compared to the European Union’s one dose per 100 people. However, gains may be limited ahead of month-end, due to portfolio rebalancing flows.
AUD/USD posted better than expected Q4 inflation data. CPI rose 0.9% y/y in Q4, which was better than forecast but well-below the Q3 result. AUD/USD peaked at 0.7763 and dropped to 0.7698 in NY.
Canadian dollar price action mirrored AUD/USD, but the loonie is also suffering from made in Canada problems. The federal government messed up the vaccine file. Canada lags most of the G-10 countries in the number of people vaccinated and is also at the back of the line for vaccines deliveries. That suggests a delay in Canada’s economic recovery.
U.S. Durable Goods Orders forecast at 0.9% for December, but the Fed meeting means traders will ignore the results.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
