USD/CAD - Canadian Dollar on Fire

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The Canadian dollar soared again yesterday. The catalyst was better than expected U.S. weekly jobless claims data which is viewed as further evidence of a post-pandemic global economic boom led by the U.S. Analysts upgraded their non-farm payrolls forecasts with many expecting well over a million new jobs. Positive risk sentiment soared, boosting stocks, and sinking the U.S. dollar. The U.S. post-pandemic recovery is moving full-steam ahead.

Traders ignored better than expected Chinese Caixin Services Purchasing Managers Index and Trade data. There are reports that the U.S. and China will meet to review the progress of the Phase 1 Trade Deal which could create some turmoil in markets. Biden Administration officials continue to admonish China over human rights, as well.

Asia equity markets closed flat to slightly higher, except for mainland China markets. Europe indexes are higher, and U.S. futures point to a positive open for Wall Street.

The Canadian dollar closed at 82.3 cents to the U.S. yesterday, despite forecasts that Canada lost 175,000 jobs in April. That is a bit of a head-scratcher.

USD/CAD is undermined by projections of a post-pandemic, commodity "super-cycle" boosting prices of raw resources. In addition, spillover effects from U.S. fiscal and monetary stimulus, and the Bank of Canada bring forward the timing of its next rate hike, are weighing on the currency pair. Traders are willing to look past ugly domestic employment data today. They expect a robust Canadian economic recovery as a growing number of Canadians have received vaccines.

EUR/USD dipped to $1.2054 in early European trading after the German trade surplus narrowed. But you can’t keep a good man down, or seemingly the single currency, as prices rebounded to the session peak of $1.2090. EUR/USD is underpinned by soft U.S. Treasury yields and bullish technicals looking for a test of $1.2150.

GBP/USD is trading near the post-Bank of England meeting peak. The BoE left interest rates unchanged but announced it was tapering Quantitative Easing purchases. It upgraded growth and inflation forecasts as well, all of which were largely expected. The BoE says the tapering is technical and not to signal rates are going to rise. GBP/USD is sitting in the middle of its $1.3890-$1.3927 overnight range.

USD/JPY traded quietly in a 108.95-109.19 range. Prices are weighed down by the Federal Reserve's dovish outlook and soft U.S. Treasury yields.

AUD/USD and NZD/USD were rangebound. Both currency pairs ignored the latest China data as traders await today’s US employment report.

Canada Ivey PMI for April is on tap


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