The Canadian dollar was the best performing G-10 currency at today’s New York open. That is not saying much, since the loonie only managed to gain 0.37%, despite WTI oil prices soaring 5.0% since yesterday morning.
Oil price gains are mainly due to reports that members of the Organization of the Petroleum Exporting Countries are complying with the production cuts announced at the beginning of the year, helped along by Saudi Arabia’s extra one million barrel per day reduction. Prices are also supported by higher price forecasts from banks such as Goldman Sachs. UBS predicted oil inventories would continue to drop in the second half of the year.
The Canadian dollar managed to squeeze a modicum of support from the oil price gains, allowing it to outperform against the Australian and New Zealand dollars.
AUD/USD suffered from a surprisingly dovish Reserve Bank of Australia (RBA) monetary policy statement. The central bank announced an extension to the quantitative easing program, surprising analysts who expected it to be unchanged while setting the stage for a tapering announcement at the March meeting. The RBA also expressed displeasure at the currency level, saying "The exchange rate has appreciated and is in the upper end of the range of recent years."
AUD/USD traders were not impressed and drove the currency from $0.7660 to $0.7590. AUDCAD fell to $0.9729 from $0.9822.
Global equity indexes accelerated higher due to news that U.S. policymakers were making progress on President Biden’s COVID-19 relief plan. The gains are somewhat perplexing as variations of the stimulus package have been talked about for months, and prices already reflected the news.
The positive risk bias evident in global equities is not quite so prominent in FX markets. EUR/USD is sinking, after breaking support at $1.2050. Further losses below $1.2010 would target $1.1810. Prices are weighed down by Italian political issues, and the European Union’s mismanagement of the coronavirus vaccine rollout. Analysts fear that an expected Eurozone economic recovery will lag that of the U.S.
GBP/USD continues to chop around in a $1.3630-$1.3770 range with price action since last Tuesday. The Bank of England policy meeting on Thursday may spark some excitement when officials are expected to announce their findings of the use of negative interest rates.
There are not any top-tier economic reports released today.
FX trading may be muted due to massive snowstorms in the New York area.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
