Daily Currency Update
CAD - Canadian DollarFollowing the US Federal Reserve policy meeting, the US dollar strengthened against the Canadian dollar throughout the afternoon after investors left equity markets and sought out USD reserves. The demand for USD halted this morning after US GDP figures failed to meet expectations.It’s usually a good effect for a currency when the actual GPD figures meeting the forecast. And, well, not so good when they don’t meet expectations. In the fourth quarter, US GDP increased 4% over the third quarter. The increase in fourth quarter GDP reflected both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States. No surprise, 2020’s GDP decreased 3.5% from 2019’s level.As demand for the US dollar fell this morning, demand for the Canadian dollar increased. After an overnight high of 1.287, USDCAD fell to 1.28 at the time of writing.
Key Movers
Britain’s new relationship with the European Union showed early signs of disruption. Manufacturers and services firms have been hit hard by supply chain and export disruption, according to data company IHS Markit. COVID-19 has exacerbated the teething problems and could reduce the British economy by 1% in the first quarter of 2021, International Monetary Fund Chief Economist Gita Gopinath said on Wednesday.The Australian dollar shifted sharply lower through trade on Wednesday as markets chased losses in a distinct risk-off move. Having tracked sideways through much of the domestic session, the AUD turned downward overnight as equity markets across Europe and the US suffered steep downward corrections on open with the EURO STOXX 50 and S&P 500 down 1.6% and 2% respectively. While the AUD has staved off moves below support at 0.7640, we will be keenly attuned to any signal the current risk-off shift could extend toward 0.76 and 0.7550. With little of note on today’s domestic agenda, the broader narrative will control direction into the North American session where attentions turn to US GDP data. A surprise uptick in annualized growth in the US could help foster expectations for a post COVID-19 recovery as analysts' attentions begin to drift back toward key underlying fundamentals.
Expected Ranges
- EUR/CAD: 1.544 - 1.559 ▲
- GBP/CAD: 1.749 - 1.758 ▼
- AUD/CAD: 0.977 - 0.982 ▼
- USD/CAD: 1.275 - 1.287 ▲