USD/CAD – Canadian Dollar Consolidating Gains

The Canadian dollar continued to consolidate its November gains in relatively subdued trading overnight.

The second-wave COVID-19 outbreak is causing waves, at least for governments. The U.S. reported 135,428 new cases on November 10, which is a 35% increase in a week. Europe and the U.K. have announced restrictions. Canada has not escaped the virus. New and more restrictive measures have been announced in Quebec, Ontario, and Manitoba, with other provinces planning steps as well.

Equity markets do not care. The news of upcoming COVID-19 vaccines has tempered their fears and Europe, and U.K. indexes are higher, as are U.S. stock futures. FX traders appear to be a tad more cautious. The U.S. dollar is trading firmer against all the majors in early New York trading.

FX markets will be thinner than usual as it is a partial holiday in the U.S. and Canada, for Veteran’s Day and Remembrance Day observations.

NZDUSD was the best performing major G-10 currency overnight. The Reserve Bank of New Zealand left monetary policies unchanged and dampened expectations of a near term rate cut into negative territory. The market was short NZD/USD, expecting an aggressively dovish statement, and when it didn’t happen, they scrambled to cover positions. NZD/USD rallied to $0.6902 from $0.6811. Prices have eased in early Toronto trading.

On the other side of the Tasman Sea, AUD/USD scraped out gains, rising to $0.7317 from $0.7287 after Consumer Confident data rose for the third month in a row. Broad-U.S. dollar demand in Europe knocked prices lower, and AUD/USD is trading at $0.7266 in Toronto.

GBP/USD rallied on reports that U.K./E.U. trade talks will continue beyond the November 15 deadline. The gains were not sustained, and GBP/USD is trading at session lows in Toronto.

EUR/USD is under pressure. Prices have dropped from $1.1832 in Asia to $1.1755 in Toronto, in part because markets believe the U.S. economy will outperform that of the Eurozone.

USDCAD is rising due to widespread demand for U.S. dollars, despite rising crude oil prices. The domestic currency direction will continue to be determined by broad U.S. dollar sentiment, and not domestic developments.

There are not any economic reports due today.

Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians