The Canadian dollar had a wild overnight session. USD/CAD closed at $1.2831 yesterday, then climbed steadily to test resistance at $1.2880, which held. Prices slid to $1.2830 just before Toronto traders got started then accelerated lower, halting at $1.2782.
Analysts are forecasting a 0.4% m/m increase in Gross Domestic Product for November.
However, the result may be worse than expected due to a sharp increase in COVID-19 containment measures during the month, which decimated the hospitality industry, again. Nevertheless, FX traders are likely to ignore the news as the results are stale.
Asia equity indexes got hammered as traders ignored the positive close on Wall Street. The Nikkei 225 index fell 1.89% while the Australian ASX 200 lost 0.69%.
European bourses sank but are slowly recouping some losses, and Wall Street appeared poised to open in the red.
It wasn’t all bad news for equity traders. Shares in the GameStop continued their wild ride. Prices dropped yesterday and closed with a 44.3% loss. News that equity trading platform Robinhood removed trading restrictions after it managed to secure $1.0 billion in emergency funding. Prices jumped 95.0% in after-hours trading.
The British pound has had a wild 24 hours, trading erratically in a $1.3640-$1.3740 range. The currency continues to be supported by foreign investment demand, following the Brexit deal, and because of month-end portfolio rebalancing flows which have fueled GBP/USD demand. Gains are capped by concerns that the ongoing coronavirus crisis, and E.U./U.K. tensions over vaccine shipments will weigh on economic growth.
EUR/USD dropped to $1.2096 overnight but quickly rebounded, rising to $1.2148 in New York. Traders ignored remarks from European Central Bank Board member and Irish Central Bank Governor Gabriel Makhlouf, saying that further ECB rate cuts are not warranted, at the moment. Prices got a bit of a lift after German unemployment and Q4 GDP improved slightly.
U.S. Chicago Purchasing Managers Index, Michigan Consumer Sentiment and Pending Home Sales reports are due. The FX impact should be minimal as equity market developments, and month-end flows will dictate direction.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
