The Canadian dollar rallied following yesterday’s better-than-expected January Gross Domestic Product data. The 0.7% m/m gain surpassed the forecast for a 0.5% increase. However, the Canadian dollar gains were due to sizeable month-end and quarter-end portfolio rebalancing flows. Even so, steady to higher oil prices, and hopes for spillover benefits from U.S. stimulus initiatives, are supporting the Canadian dollar.
In addition, some analysts believe the Bank of Canada’s April 21 monetary policy statement will be less dovish than previous ones, which is also supporting the currency.
Last night, U.S. President Biden announced plans for another stimulus plan worth about $2.3 trillion, which is on top of the $1.9-trillion COVID Relief bill passed March 10, and the $900 Coronavirus bill on December 21.
The news underpinned global risk sentiment. Asia equity indexes closed higher led by a 1.24% gain Hong Kong’s Hang Seng index, supported by Japanese and Chinese economic data. European bourses are trading with gains, and Wall Street is poised to open in positive territory. Gold and oil prices rose while 10-year Treasury yields are 1.718%
EUR/USD is at the top of its overnight $1.1714-$1.1742 range. Positive sentiment from hopes Biden’s latest spending plan boosts global economic growth is offset by ongoing COVID-19 issues in Europe.
France is locking the country down for a month and maintaining a curfew. EUR/USD did not get any support from European Central Bank Chief Economist Philip Lane. He said the near term economic outlook is uncertain and that the latest rise in inflation is all because of the pandemic shock. Euro area Purchasing Managers Index data was better than expected but ignored. The short-term EUR/USD technicals are bearish below $1.1760.
GBP/USD was steady in Asia, then dropped to $1.3748 in early Europe before rebounding to $1.3794 after better than expected U.K. Manufacturing PMI data (actual 58.9 vs forecast 57.9). That is the highest reading for the index since 2011. GBP/USD is trapped in a $1.3670-$1.3850 range with a negative bias from the February downtrend line that comes into play at $1.3850.
U.S. weekly jobless claims are forecast at 680,000, a small improvement from last week. Institute for Supply Management Manufacturing PMI is expected at 61.3 compared to 60.8.
The Easter long weekend means market liquidity will start evaporating rapidly just before lunchtime. A large swath of Europe and the U.K., Australia and New Zealand are closed on Friday and Monday. Canada and the U.S. are closed Friday.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians.
