The euro and the pound both moved higher as expectations of rate hikes in Europe, while Spanish and Dutch finance ministers were said to be working together for a deal that keeps Britain close to the EU. The Canadian dollar remains unchanged as markets await the next comment coming from either side of the 49th parallel, nervousness has allowed the CAD to weaken even in the face of rising oil prices. Expect further volatility in the near future, also keep in mind of the Bank of Canada’s rate hike next week, and the potential for even more in the coming year.
USDCAD 1.2505, 1.2498, 1.2488 1.2525, 1.2533, 1.2538
The euro rallied again today, and was showing a 0.8% gain in the dollar as of the late London AM session, which was the weakness currency on the day so far, and a 0.6% advance on the yen and a 0.2% gain versus sterling. News of a breakthrough in German coalition negotiations provided a buying catalyst in a market that is bullish for the euro, with recent data having on net reaffirmed the picture of accelerating growth momentum and the ECB minutes having yesterday affirmed that the central bank is course to end its asset purchase program. EUR-USD smashed through the 2017 high at 1.2092 on route to logging a 37-month peak at 1.2136. This is now the fourth consecutive week that the pair has posted a higher high from the previous week. The euro broke and closed above both the 20- and 50-day moving averages yesterday, too. The December 2014 high at 1.2569 provides an upside target. Trend support is at 1.2028-30.
USD-CAD has retreated to the lower 1.25s after logging a high-for-the-year at 1.2590 yesterday. A broader retreat in the U.S. dollar coupled with Loonie-supporting reports of a possible breakthrough in NAFTA negotiations, have weighted on USD-CAD. A lot of focus will remain on the NAFTA negotiations, with uncertainty about this having curtailed the Canadian dollar rallying amid the surge in oil prices and expectations for the BoC to hike interest rates by 25 bp next Wednesday. Ahead into 2018, how the U.S. dollar benefits from the expected tax overhaul, how oil prices evolve, how NAFTA re-negotiatios go, and how the BoC proceeds with its slow-go tightening cycle will be dominant themes for USD-CAD.