USD/CAD - Canadian Dollar Grinding Out Gains

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The Canadian dollar underperformed against the G-10 majors this week. The currency managed to gain 0.48% since Toronto’s opening level on Monday. The New Zealand dollar was the best performing G-10 currency rising 0.90%, while the Australian dollar gained 0.56%.
The fact that Canadian dollar gains lagged those of the antipodean currencies is alarming since the Reserve Bank of Australia and the Reserve Bank of New Zealand are actively hinting at negative interest rates in the near future.

Conversely, the Bank of Canada said that although negative interest rates are in their "tool-kit", they are not on the agenda. Markets are hoping for clarity on the BoC’s outlook at next week’s monetary policy meeting.

The last U.S. presidential debate ended without causing a ripple in global financial markets. Joe Biden has a six- or seven-point lead in the polls, but pundits are not holding their breaths.

Hillary Clinton had a 12-point lead, on October 23, 2016.

The results were reflected in global equity market activity.

Not much happened. Asia equity indexes were higher except for those in mainland China. The U.K. FTSE 100 is up 1.59%, leading European bourses higher and S&P futures suggest Wall Street will open in positive territory.

The equity market gains are happening even new US COVID-19 cases surge to new highs, with over 73,000 reported yesterday. Traders are betting that a vaccine is imminent.

EUR/USD rose 0.73% since Monday and consolidated those gains in a 1.1788-1.1853 range overnight. Traders ignored somewhat disappointing Euro area Purchasing Managers Index figures which warned that another recession is possible. Services and Composite PMI data missed forecasts, but traders appeared to focus on the better than expected manufacturing data.

EUR/USD continues to be supported by broad U.S. dollar weakness, but the ongoing EU/UK trade talk uncertainty and next week’s European Central Bank meeting may limit gains.

GBP/USD is consolidating this week’s gains and traded in a $1.3052-$1.3112 range overnight. Prices are underpinned by increased hopes for at least a watered-down E.U./U.K. trade deal which avoids a "hard-Brexit." Traders ignored better than expected Retail Sales data because new coronavirus measures will put a damper on next months results.

The Canadian dollar is likely to trade sideways for this session, due to a lack of U.S. or Canadian economic data, and from caution ahead of next week’s BOC meeting.

Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
Learn how KnightsbridgeFX can help you save up to 2% when buying or selling US dollars compared to your Canadian bank’s rates – click here to compare bank rates