GFX Morning FX Commentary, May 3rd, 2012

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is .9775-.9875

Today’s expected range for the Canadian Dollar against the Euro is 1.2900-1.3000

Today’s expected range for the Canadian Dollar against Sterling is 1.5910-1.6000

The US Dollar is stronger overnight as the market was trading with the expectation that ECB Governor Draghi will either announce an interest rate cut this morning or at the very least hint at a future rate cut. The Euro is also weaker on the back of higher borrowing costs for Spain, a situation which could be fuelling the ECB’s need to cut rates. One of the reasons that I think Europe is in such dire straits is the rate of youth unemployment, in Spain for example under 25 unemployment is pushing 25%. With the advent of social media this fact has the potential of creating widespread unrest and causing havoc with European economy. I am also not sure what these countries can do about it when they are all broke, look for many election defeats of existing Government’s incoming months causing further uncertainty in global financial markets, Sarkozy has a real chance of losing the French election and he would only be the first.

The announcement on interest rates is at 07:45 and the all-important press conference is at 08:00am.

Creating more concern about the global slowdown was a report out of New Zealand that unemployment increased in that country last month. The US employment picture tomorrow will be a very important release and an indicator of where the currency market wants to go.

The Canadian Dollar is very strong this morning against the Euro and Sterling as the Loonie has been able to take advantage of the weaker Euro. This strength has also helped the Loonie hold its ground against the USD, given the strength in the US Dollar recently I would  have expected USD.CAD to move higher but that does not seem to be the case. If Draghi’s hints at an interest rate cut today then equity markets should move higher and USD.CAD test the .9800 level. If it is status quo after the announcement then USD.CAD should move back higher.

Have a great day

Mike

GFX Morning Currency Rates
Thursday, May 03 2012
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		0.9831			0.9864
CAD/USD		1.0172			1.0138
EUR/USD		1.3135			1.3138
EUR/CAD		1.2916			1.2965
STG/CAD		1.591			1.5965
AUD/CAD		1.0121			1.0187
CAD/JPY		81.62			81.35
CAD/CHF		0.9289			0.9264
CAD/HKD		7.7588			7.8589
CAD/CNY		6.41			6.3908
CAD/MXN		13.1733			13.1142
Commodities
Gold		$1,645			$1,652
OIL		$104.89			$105.63
Option Volatility
Canada
O/N		11.97%			10.46%
1 Week		8.66%			8.19%
1 Month		8.55%			8.22%