The Canadian dollar rallied Friday, after Canada November Gross Domestic Product was higher than expected, rising 0.7% m/m compared to forecasts for a 0.4% gain. USD/CAD dropped from $1.2850 to $1.2740 on the news. However, the result leaves Canada’s economy still 3% lower than its pre-pandemic level, which tempered USD/CAD selling enthusiasm.
All in all, it was a strong report, suggesting that the domestic economy is more resilient than previously thought. However, the shortage of vaccines for the domestic market means the economic rebound is easily de-railed.
Global equity markets started the new month on solid footing. Asia equity indexes closed with gains, and European bourses post solid gains, led by the German Dax which is up 1.5%. S&P 500 futures point to a positive open on Wall Street. Oil and gold prices have climbed around 0.90% since Friday’s close.
Silver traders entertained markets overnight. Silver (XAG/USD) jumped 10%, leading some analysts to suggest it was a "GameStop" move directed by retail traders. Others dismissed that view because the silver market is far deeper than GameStop and thus harder to manipulate.
The U.S. dollar opened with gains against the G-10 majors, except against the British pound which managed to squeeze higher.
EUR/USD traded sideways, with a negative bias in Asia, then dropped from $1.2141 to $1.2071 in early New York trading. Traders ignored modest improvements in Eurozone Manufacturing Purchasing Managers Index and employment, preferring to concentrate on bearish short-term technicals which are bearish below $1.2150, looking for a retest of $1.2110. Italian politics are also a negative as politicians seek to find enough common ground to form another coalition government and avoid an election Sentiment is also negative after "verbal currency intervention" from many European Central Bank officials.
GBP/USD outperformed the rest of the G-10 majors with prices climbing from $1.3696 to $1.3757. However, the rally didn’t last, and prices dropped to $1.3705 in New York. The currency outperformed in part because the U.K. is ahead of the competition in COVID-19 vaccinations. Prices were underpinned by better than expected January Manufacturing PMI, which was 54.1 compared to previous estimates of 52.9.
AUD/USD and NZD/USD are trading in the middle of their overnight ranges after the EUR/USD retreat paused. AUDUSD traders are looking ahead to the Reserve Bank of Australia monetary policy meeting on Tuesday. Analysts expect that officials will offer an upbeat outlook.
U.S. Institute for Supply Management manufacturing data is due today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
