Traders hammered the Canadian dollar yesterday, but it is slowly recovering those losses. USD/CAD soared from $1.3280 to $1.3390 yesterday, but retreated to $1.3297 in early Toronto trading, on the back of U.S. dollar selling versus the G-10 majors.

October was a topsy-turvy month for the Canadian dollar. USD/CAD declined steadily at the beginning of the month but bottomed out last Wednesday at $1.3085, ahead of the Bank of Canada (BoC) monetary policy meeting.

Prices climbed steadily until peaking yesterday. Usually, a dovish monetary policy outlook and a comment by the BoC Governor that interest rates would remain low “for a very long time,” would precipitate a USD/CAD rally. The rally occurred, but if the BoC’s comments played a role, it was a very minor.

The USD/CAD rally was fueled by a stampede into safe-haven U.S. dollars when rising coronavirus cases sparked renewed lockdown measures in parts of Europe and the U.K. Steadily climbing positive tests in the US raised fears that officials would need to enact lockdown measures as well.

Thursday’s European Central Bank monetary policy meeting failed to deliver on some analyst’s expectations for a new monetary stimulus package. Any disappointment was washed away when the statement broadly hinted at December action. It said: “The new round of Eurosystem staff macroeconomic projections in December will allow a thorough reassessment of the economic outlook and the balance of risks. On the basis of this updated assessment, the Governing Council will recalibrate its instruments, as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favourable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path.”

EUR/USD dropped, falling from $1.1770 to $1.1650, which also fueled US dollar gains against the rest of the major G-10 currencies. The Canadian dollar was collateral damage.

Canada Gross Domestic Product data is due today, but the results will be ignored following the Bank of Canada’s dovish policy outlook. Today’s U.S. data will also be a non-factor for traders due to Tuesday’s election.

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