The Canadian dollar is trading with a bullish bias. USD/CAD could not breach support at $1.2440 yesterday or overnight, but the retracement was shallow, suggesting prices are regrouping for another assault on the lower level.
The Canadian dollar is the best performing major G-10 currency since the beginning of February, rising 2.61%. Surging oil prices played a large role. West Texas Intermediate (WTI), the North American benchmark price, rose 17% in the same period.
Steady to higher oil prices will continue to underpin the Canadian dollar, even though today’s International Energy Agency Oil Market Report pushed back against forecasts of an oil “super-cycle.” The report said that their data and analysis suggest oil inventories are still “ample” compared to historical levels, even after a steady decline in inventories, estimating the surplus to be 110 million barrels.
The agency also noted there was a “hefty amount of spare production capacity as a result of the (Organization of the Petroleum Exporting Countries) supply curbs.” However, it expects that “A stronger economy and vaccine deployment will support growth in 2H21, reducing the oil demand gap vs 2019 from 4.8 mb/d in 1Q21 to 1.4 mb/d in 4Q21.”
The domestic economy may get a boost from the earlier than expected delivery of COVID-19 vaccines. Prime Minister Trudeau and his team have determined that vaccines that required two doses within 21 days are effective if the second dose is delivered three to four months later.
The U.S. has administered more than 107 million vaccines reaching 21% of the population. The approval of President Biden’s $1.9-trillion COVID-19 Relief package means stimulus cheques are already being sent to Americans. That suggests a healthy boost to the American economy, and Canada’s trade relationship with the U.S. means Canada benefits by default.
EUR/USD traded in a $1.1887-$1.1916 range overnight and is probing the bottom of that band in Toronto trading today. U.S. 10-year Treasury yields climbed to 1.641% from 1.61% in Asia and are weighing on the single currency. Eurozone inflation was as expected and not a factor for traders.
Canada Consumer Price Index is expected to rise 1.4% y/y in February, a tad lower than the 1.6% y/y in January. February CPI is expected to rise 0.7% m/m, compared to 0.6% in January.