GFX Morning FX Commentary, June 22nd

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is 1.0225-1.0325

Today’s expected range for the Canadian Dollar against the Euro is 1.2880-1.3000

Today’s expected range for the Canadian Dollar against Sterling is 1.6010-1.6125

The US Dollar was considerably stronger yesterday afternoon and that strength continued into the overnight session as Moody’s yesterday afternoon downgraded some 15 Global Banks (RBC amongst them) on the expectation that they would not have enough capital to survive through another 2008 style meltdown, among the Downgrades were some very large US financial institutions. Yesterday saw both the Dow Jones and TSX have disastrous days which helped push EURO.USD down and USD.CAD higher. So much for the boost the EURO received whit the Greek election result.

The Euro was also hit this morning on the report that German business confidence was dropping and when you factor in the fact that economic data out of the US has been less than impressive lately you get the situation where global investors are very worried about global growth. For those doing business in India, the Indian Rupee dropped to a record low against the US Dollar, so to purchase Rupee it is going to cost you much less than it did a few months ago, which should be good for the Indian export market.

With the strength in the US dollar the Loonie has given up some gains over the past 24 hours and once again we are back in the 1.0200 to 1.0300 range with USD.CAD looking like it wants to break back above 1.0300, the move below 1.0200 did not last very long. This is yet another perfect example of USD.CAD being dragged around by forces outside the country.

Up today we do get the release of the Canadian CPI data and we are expecting a core inflation rate of 1.9%, down from 2.1% last month. If the number is as expected then the Bank of Canada will have no reason to be concerned and interest rates will not change anytime soon, especially after the change in the mortgage rules yesterday which is effectively an interest rate hike designed to cool the Canadian housing market and prevent a housing collapse. The question is,  has it come too late to stop a collapse? Pay close attention to the Canadian housing data over the next 6 months, if house prices start to drop this could get very ugly for Canada.

With the North American equity markets poised for a bit of rebound today USD.CAD should stick in the expected range but if we see any weakness in equities then USD.CAD will jump above 1.0300.

Have a great weekend, I will be out of the office today, if you need anything just give Randy or Mike a call.

Mike

GFX Morning Currency Rates
Friday June 22, 2012
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0274			1.0206
CAD/USD		0.9733			0.9798
EUR/USD		1.2551			1.2669
EUR/CAD		1.2898			1.2932
STG/CAD		1.6035			1.605
AUD/CAD		1.0318			1.0377
CAD/JPY		78.12			78.22
CAD/CHF		0.9304			0.9281
CAD/HKD		7.5439			7.7393
CAD/CNY		6.1916			6.233
CAD/MXN		13.4967			13.4397
Commodities
Gold		$1,569			$1,599
OIL		$78.63			$80.78
Option Volatility
Canada
O/N		9.65%			13.00%
1 Week		10.17%			9.50%
1 Month		9.55%			9.30%

Today's Economic Calendar
USA
None

CANADA
CPI Inflation report for May (08:30)