The Canadian dollar is on a tear, relatively speaking. USD/CAD extended losses yesterday, breeching support at $1.3000, and touching $1.2990, before rebounding to $1.3027 overnight. However, the Canadian dollar gains since November 2 pale in the face of the gains achieved by its commodity bloc cousins, AUD/USD which rose 4.37%, and NZD/USD, up 5.29%.
The Canadian dollar is getting some support from WTI oil prices which have risen over 34% since November 2. Oil prices have gained because of speculation that when the Organization of the Petroleum Exporting Countries and Russia meet at the end of the month, they will agree to delay the schedule reduction of existing production cuts until the middle of 2021. Also, news of successful COVID-19 vaccine tests raised expectations for a surge in oil demand in the coming months.
Global equity indexes continue to climb. The Dow Jones Industrial Average closed above 30,000 for the first time Tuesday. The S&P 500 index is up over 11% this month. That positive risk sentiment has driven the U.S. dollar down against the major G-10 currency pairs, in part because safe-haven currency trades are being unwound.
In Europe, EUR/USD rallied to $1.1929 before retreating to $1.1883 in Toronto. The positive risk sentiment which lifted the single currency bumped into technical resistance and cautious chatter from European Union and European Central Bank officials. The ECB Financial Stability Report warned governments that abruptly ending fiscal stimulus programs would derail the economic recovery. E.U. President Ursula von der Leyen said that she thinks the E.U. and U.K. will reach a trade agreement but said they would not accept a deal that undermined the single market.
GBP/USD is consolidating this week’s gains in a $1.3306-$1.3383 range, with hopes for a Brexit deal underpinning prices.
The U.S. unloads a slew of top-tier economic reports today. They include third-quarter Gross Domestic Product, which is expected to rise 33.2% y/y, Michigan Consumer Confidence (forecast unchanged at 77) October Durable Goods Orders (forecast 0.9%) and Initial Jobless Claims (forecast 730,000).
There are not any Canadian releases.