The Canadian dollar market was a sea of calm compared to yesterday’s wild swings. USD/CAD touched $1.2952 early yesterday morning and then dropped to $1.2820 in the mid-afternoon, before closing the session at $1.2860. The FX frenzy was fueled by external events, namely Brexit, the discovery of a new strain of COVID-19, and U.S. budget and COVID-19 Relief bill developments. Some traders are concerned that Canadian dollar gains may meet headwinds from an oil price drop. The Organization of the Petroleum Exporting Countries is increasing production in January even as fears that the second-wave pandemic will reduce demand in Q1 2021.
FX liquidity is rapidly evaporating as traders close their books on 2020, leaving the major currency pairs vulnerable to random price swings.
The U.S. dollar is modestly firmer at the Toronto open.
GBP/USD has been exceptionally volatile today, trading erratically between $1.3363 and $1.3468. Prices react violently to Brexit headlines and rumours, while the latest U.K. coronavirus developments add another layer of uncertainty.
France continues to keep its borders closed to U.K. travelers and freight.
Over 1,500 trucks are waiting to cross into France. GBP/USD got a bit of a lift after a "source" told the U.K. Guardian that France was expected to announce a limited opening today. Traders are also leery about another U.K. national lockdown due to rising coronavirus cases.
There were reports that Britain made concessions on fishing quotas. Britain reduced its demand for the European Union to reduce the value of its fishing catch by 60% to 35%.
The E.U. maintains it will not move beyond 25%. Also, Britain changed its demand for a three-year phase-in period to five years.
And the talks go on.
EUR/USD continues to consolidate lasts weeks gains following the break of resistance at $1.2160, which is now acting as support. The single currency traded in a $1.2205-$1.2249 range overnight and is trading near the top of that band in Toronto. Prices are supported by improved risk sentiment following the U.S. COVID-19 Relief deal, and by the news that E.U. citizens will start receiving a coronavirus vaccine after Christmas.
U.S. Q3 Gross Domestic Product is expected to have risen 33.1% q/q, but the news will not be a factor to traders. Instead, the focus will continue to be on Brexit and Wall Street.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
