The Canadian dollar is under pressure to start the week. USD/CAD closed Friday at $1.2738 and prices climbed steadily, rising to $1.2798 just before Toronto opened. The Canadian dollar weakness is part of broad shift in U.S. dollar sentiment following last week’s $1.9-trillion Relief package announced by President-Elect Joe Biden. Many analysts believe that the Biden’s plan will stoke inflation, and force the Federal Reserve to raise interest rates sooner than expected. Fed Chair Jerome Powell, and many of his colleagues pushed back against that view, but the dollar continues to firm. The greenback strength may also be due to the unwinding of positions that were put into place on anticipation of the stimulus plan.
There is a minor whiff of negative risk sentiment in the air due to U.S. media hyping the prospect of wide-spread violence from pro-Trump supporters when Biden is inaugurated.
The Canadian dollar may also be suffering from news that Pfizer will delay vaccine shipments by a month in order to retool a Belgium production facility. The news comes at time when provincial governments are warning hospitals are running out of ICU beds. Ontario, Canada’s largest province, declared a State of Emergency last week, which included a “stay-at-home order.”
The Canadian dollar got more bad news. One of the first items on Biden’s agenda is to cancel the Keystone XL pipeline.
Former Fed Chair Janet Yellen is also helping to underpin the U.S. dollar. She is Biden’s nominee for Treasury Secretary, and, according to the Wall Street Journal will tell the confirmation hearing: “The value of the U.S. dollar and other currencies should be determined by markets. Markets adjust to reflect variations in economic performance and generally facilitate adjustments in the global economy The United States doesn’t seek a weaker currency to gain competitive advantage. We should oppose attempts by other countries to do so.”
The U.S. dollar added to Friday’s gains in early Toronto trading. Canada Housing Starts are the only data available today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians