The Canadian dollar is adrift in a narrow USD/CAD range of $1.3150-$1.3205.
The domestic currency ignored yesterday’s Bank of Canada quarterly Business Outlook Survey (BOS) and instead tracked EUR/USD moves.
The BOS did not offer any surprises. Sentiment rebounded from -6.9 to -2.5, a marked improvement but still very weak and well-below pre-pandemic levels. The Survey highlighted “After many containment measures were lifted and business activity resumed over the summer months, firms now expect sales to increase from low levels. There are indications the pace of the recovery will slow and be uneven across industries. Although the majority of firms expect the rebound in their sales to continue, one-third of businesses anticipate their sales will not return to pre-crisis levels within the next 12 months.” The latest coronavirus outbreaks in parts of Ontario, Quebec, and other regions, suggest that a further rebound in sentiment may be delayed.
EUR/USD rallied to $1.1817 from $1.1761 driven by demand for the first-ever issuance of European Union “social bonds.” The EU offered €10 billion of 10-year and € 7 billion of 20-year bonds to support COVID-19 Relief expenditures. Reportedly, the union had orders for €223 billion of the AAA-rated bonds. Prices also got a bit of a lift from a widening of the eurozone current account surplus.
Geopolitical concerns due to the contested election in Belarus, along with tensions between Greece and Turkey, and a resurgence of coronavirus cases may limit gains.
GBP/USD is the ball in a ping-pong game. The currency continues to bounce between support at $1.2850 and resistance at $1.3050, depending on the Brexit headline. Prices sank last Friday when Prime Minister Boris Johnson said the U.K. would walk away from the Brexit discussions. They recovered all the losses when negotiations resumed over the weekend, and yesterday. GBP/USD touched $1.2978 in early Toronto trading and then dropped to 1.2940, on dire warnings from a Bank of England official, Gertjan Vlieghe, who said the resurgence of the coronavirus would undermine the U.K. economic recovery.
A central bank official knocked AUD/USD for a loop. Reserve Bank of Australia Assistant Governor Chris Kent suggested that interest rates could be cut and QE expanded. His remarks came on the heels of similar dovish comments from RBA Governor Grahame Orr. AUD/USD dropped from $0.7113 yesterday to $0.7033 today.
U.S. Building and Housing starts are on tap today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians