The Canadian dollar traded higher overnight, lifted by AUD/USD and NZD/USD gains. The antipodean currencies rallied on improved global risk sentiment. The Chinese yuan continued to trade higher, and that development raised expectations for a trade fueled, global economic rebound, on the heels of a successful COVID-19 vaccine.
There is a danger that markets may be getting too far ahead of themselves. A coronavirus vaccine won’t be readily available till some time in the late spring, and that doesn’t necessarily mean that an effective distribution mechanism will be in place. More immediately, new COVID-19 cases continue to rise or remain stubbornly high in Ontario, Quebec, Manitoba, as well as in the U.K., Europe, and the U.S.. The impact of measure to contain the virus will negatively effective short-term economic growth, and it is hard to see the current "risk-rally" lasting.
The British pound continues to grind higher on anticipation that the European Union and U.K. will come to terms on a Brexit deal. The U.K. Telegram reported that France was ready to make concessions on fishing rights, which could pave the way to an agreement. However, other reports argue that Prime Minister Johnson and E.U. officials remain far apart on critical issues. GBP/USD drifted higher, rising from $1.3245 to $1.3296, with U.K. Producer Price Index and Consumer Price Index data being a non-factor for traders.
EUR/USD traded sideways in a $1.1851-$1.1890 band. Traders are torn between buying euros on hopes for a robust global economic rebound and selling euros because of E.U. politics and Brexit. Hungary and Poland vetoed the latest 2021-2027 budget proposal and ongoing Brexit discussions are concerns.
Overnight Asia equity indexes closed with small gains except in Japan where the Nikkei 225 shed 1.10%. European equity indexes are modestly higher as are U.S. equity futures.
Canadian dollar direction continues to be driven by U.S. dollar sentiment.
That will not change today, even though Statistics Canada releases October inflation data. CPI is forecast to rise by 0.2%. West Texas Intermediate (WTI) climbed to $42.43 from $41.10, which contributed to positive Canadian dollar sentiment.
Today’s U.S. economic data is second-tier. October Building Permits and Housing Starts are on tap.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
