The Canadian dollar is trading below its overnight low following a fresh wave of positive risk sentiment. Canada has already received the first 300,000 doses of Pfizer’s COVID-19 vaccine, which is enough to inoculate 150,000 Canadians. The other 37.45 million Canadians just have to wait their turn, which for over 53% of the population, will not occur until December 2021. Still, the news was enough to take the sting out of rising COVID-19 cases in Canada and the imposition of stricter lockdown measures. USD/CAD dropped from the Asia peak of $1.2762 to $1.2731 in Toronto trading today.
Once again, Brexit is driving global risk sentiment. European Union Commission President Ursula von der Leyden, and U.K. Prime Minister Boris Johnson announced an extension to the negotiations on the weekend, which led to GBP/USD gapping higher when Asia opened. Prices jumped from $1.3219 to $1.3370 before sliding to $1.3330 just before Europe opened. The rally resumed, and GBP/USD hit $1.3444 after EU Chief Negotiator Michel Barnier saw progress on fisheries and the “level playing field” issues.
The good news kept coming. Concerns about the U.S. government disappeared after officials agreed to extend the spending bill to December 16. Even better, policymakers appear to have agreed on a $908-billion COVID-19 Relief bill, which is supposed to be tabled today. Also, the electoral college is expected to formally announce that Joe Biden won the election and will become the 46th President on January 20.
EUR/USD rallied alongside GBP/USD, but its gains were substantially smaller. The single currency climbed to $1.2170 from $1.2113 thanks to broad U.S. dollar weakness. European stock markets are also posting gains. Eurozone Industrial Production, and Capacity Utilization data rose, but they were non-factors for FX markets.
USD/JPY was under pressure from surging U.S. Treasury yields. 10-year U.S. Treasury yields rose 3.5% which knocked the currency pair down to 103.62 from 104.10.
AUD/USD and NZD/USD rallies were fueled by positive risk sentiment, broad U.S. dollar weakness, and commodity price gains.
This is the last full week of FX trading ahead of the Holiday Season. Many Institutions, hedge funds and major corporations have already closed their books for the year, which suggests liquidity will be an issue on the march to year-end.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians