FX Morning Commentary January 27th, 2012

Good Morning,

Today's expected range for the Canadian Dollar against the US Dollar is .9965-1.0075

Today's expected range for the Canadian Dollar against the Euro is 1.3120-1.3220

Today's expected range for the Canadian Dollar against the against Sterling is 1.5700-1.5800

The US Dollar continued its decline as the Euro continues to gain strength after the Federal Reserve announcement on interest rates on Wednesday. This morning the Euro got some early strength from a better than expected Italian Bond auction and comments from EU officials that they are "very close" to reaching an agreement with private investors on a Greek bond swap. Deutsche Bank, one of Germany's leading banks has come out with the statement that the fair market value for EURO.USD should be around 1.3500,(presently trading at 1.3150), if they are correct and the Euro starts to move higher then there would be a reasonable expectation that USD.CAD would fall back towards the .9800 level. I am a bit skeptical that such a level for the Euro can be achieved in the short-term but if the news out of Europe turns positive anything is possible.

Up today we get the release of the US GDP report for the 4^th quarter of 2011 and the expectation is for annualized growth of 3.0% which will be up from the previous reading of 1.8% growth. Again we are seeing strong numbers out of the USA which along with lower interest rates should help the equity markets go higher today.

USD.CAD was contained in a very tight range last night and still looks like it wants to break lower against and have the Loonie once again trade at a premium to the US Dollar, if the EURO.USD keeps rising then the Loonie will surely get stronger. Unless we get a real surprise in the US GDP report today I would not expect a big run for the Loonie, look for the .9975 level to hold in and if we do get a bit of a run higher US dollar sellers really need to look at 1.0050 as a good level to get some extra value in the very short-term.

I will be out of the office today, but available via cell phone and able to check emails all day, it is the original Mrs. Smith 90^th birthday so we are having a big soiree in her honour this evening out near Hamilton.

Have a great weekend

Mike
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Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.002			1.0016
CAD/USD		0.9998			0.9984
EUR/USD		1.3136			1.3142
EUR/CAD		1.314			1.3165
STG/CAD		1.5709			1.57
AUD/CAD		1.0656			1.0677
CAD/JAP		76.89			77.45
CAD/CHF		0.9188			0.9159
CAD/HKD		7.7549			7.7429
CAD/CNY		6.3317			6.3021
Commodoties
Gold		$1,723			$1,715
OIL		$100.08			$100.38
Option Volatility
O/N		12.76%			12.76%
1 Week		9.88%			9.88%
1 Month		9.49%			9.49%

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