Canadian Dollar Hangs on to Gains

The Canadian dollar soared on Wednesday, rising 2.1% against the US dollar.  The move followed a sort of surprising Bank of Canada interest rate increase.  The BoC increased the overnight rate from 0.75% to 1.00% and issued a very upbeat sounding statement. The Bank cited: 1) stronger than expected economic data   2) Growth becoming more broadly-based and self-sustaining 3) widespread strength in business investment and exports., as reasons for the interest rate move.  The hawkish tone of the statement led to some economists raising their forecasts for one more rate increase in 2017.

The Canadian dollar rally was boosted by broad US dollar weakness against the major currencies.  The US dollar has been under selling pressure due to the Federal Open Market committee’s dovish stance and a lack of guidance from Fed chair Janet Yellen.

Hurricane Harvey devastated Houston and the Texas Gulf Coast, raising concerns that it will negatively impact the US economy in the short term.  Those fears grew on news that Hurrican Irma, a Category 5 storm, may hit Florida.

Overnight, FX markets were subdued but still active.

The US dollar opened in  New York session with losses across the spectrum. Fears ahead of today’s European Central Bank (ECB) meeting, Hurricane Irma and North Korea contrasted with news of a US bipartisan debt ceiling extension agreement.

EURUSD was asleep in Asia but woke up with a start in Europe. EURUSD rallied from 1.1915 to 1.1981 by the New York open.  Eurozone Q2 GDP rose 2.3%, y/y beating the 2.2% forecast.

The ECB is expected to defer a tapering announcement until October.  We will know for sure in shortly

USDJPY was unable to add to Wednesday’s gains made after the USdebt ceiling announcement.  Instead, prices declined steadily, falling from 109.25 to 108.84.

AUDUSD moved higher in early Asia trading and then dropped when July Retail Sales came in at 0.0% rather than the 0.3% forecast. Prices recovered in Europe on broad US dollar weakness.

NZDUSD  drifted up early, dropped in Europe and then bounced, all the while trading in a 0.7174-0.7216 range.

 

 

 

 

FX Ranges for major currency pairs

 

close Open Range Sep 4-5
6-Sep-17 7-Sep-17 High Low
EURUSD 1.1915 1.1979 1.1948 1.1904
USDJPY 109.32 108.87 108.83 108.46
GBPUSD 1.3041 1.3072 1.3046 1.3020
USDCHF 0.9573 0.9524 0.9557 0.9529
AUDUSD 0.7993 0.8015 0.8019 0.7975
NZDUSD 0.7191 0.7199 0.7259 0.7222
USDCAD 1.2228 1.2201 1.2397 1.2367
GOLD 1334.05 1334.08 1340.01 1332.89
WTI 49.15 49.00 49.30 48.95

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