USD/CAD - Canadian Dollar Rally Hits Wall

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The Canadian dollar rallied from the opening bell in Asia and continued to do so throughout the overnight session. USD/CAD closed Friday at $1.2745 and is trading at $1.2677 in Toronto today. It is the best performing of the major G-10 currency pairs.

Prices are supported by West Texas Intermediate (WTI) oil prices which have been steady over $60.00/barrel. Oil traders are looking ahead to the Organization of the Petroleum Exporting Countries plus Russia meeting on Thursday. OPEC believes the previous production cutting measures have returned production and demand back into balance. The International Energy Agency is forecasting that the post-pandemic global economic rebound will increase crude demand and easily absorb the higher crude volumes.

The Canadian dollar is also getting a bit of support from expectations for robust U.S. economic growth as Canada trade benefits from higher U.S. demand.

Global risk sentiment improved modestly after the U.S. House approved President Biden’s $1.9-trillion stimulus package. There is still work to do, but the Democrats control the Senate, which suggests the bill will pass.

The Reserve Bank of Australia (RBA) pushed back against rising yields.

It doubled the size of his regularly scheduled bond purchases, which may be a sign that other central banks will take similar actions. AUDUSD traded higher until Europe opened, then prices retreated. Traders are cautious ahead of the RBA meeting Tuesday if the central bank complains about the level of AUD/USD after its February rally.

EUR/USD traded in a $1.2029-$1.2100 range. Traders ignored an uptick in Manufacturing Purchasing Managers Index to 57.9 in February. The data is at its highest reading in over three years. German inflation rose 1.6% y/y in February. European Central Bank President Christine Lagarde is expected to reiterate that the economy needs substantial monetary support in a speech later today.

GBP/USD is trading at the bottom of its $1.3923-$1.3998 range. Traders are cautious ahead of Wednesday’s U.K. budget announcement and ignored today's Manufacturing PMI report. GBP/USD continues to be supported by its vaccine rollout, which suggests the country will not need any restrictions by the end of June.

USD/JPY remains underpinned by firm U.S. 10-year Treasury yields, which are hovering around 1.44%.

U.S. Institute for Supply Management manufacturing PMI data and speeches from two Federal Reserve officials are the highlight for today.

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