GFX Morning FX Commentary, July 5th, 2012

Good Morning,

Today's expected range for the Canadian Dollar against the US Dollar is 1.0075-1.0175

Today's expected range for the Canadian Dollar against the Euro is 1.2650-1.2775

Today's expected range for the Canadian Dollar against Sterling is 1.5750-1.5875

The US Dollar is marginally stronger this morning in very quiet overnight markets. EURO.USD is slightly lower from our close yesterday as the markets get ready for the interest rate announcements from both the European Central Bank and the Bank of England. The expectation is that the ECB will cut interest rates by 0.25% to 0.75% and the BOE is expected to add 50 BLN to their quantative easing program to add more liquidity to the banking system and encourage more bank lending. My expectation would be that equity markets will like both of these moves and we should see the Euro and Pound rally. I would still favour to sell the Euro on any strength as the fundamental root of the problem still remains.

As I write this morning the Bank of England has announced that they have kept their interest rate at current level of 0.5% but they have increased their quantative easing by 50 billion Pounds as expected. In an unexpected move the Peoples Bank of China announced that they are cutting their one year lending rates by 0.31 percentage points, clearly signs that the global economy is in trouble. As expected equity markets jumped higher and Sterling and Euro rallied a little. The ECB is up later this morning.

The Canadian dollar continues to hold onto its strength against the USD in tight overnight ranges, the Loonie is doing very well against the Euro and Sterling and in fact is at its strongest point this year against the Euro. While Euro weakness will most likely continue to push EURO.CAD lower but having said that it may be the time to take some money off the table and buy some forward contracts for anyone who will need to purchase Euro in the next little while.

Have a great day

Mike

GFX Morning Currency Rates
Thursday July 5th, 2012
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0132			1.0128
CAD/USD					0.9874
EUR/USD		1.2506			1.2566
EUR/CAD		1.2624			1.2729
STG/CAD		1.5761			1.5847
AUD/CAD		1.0416			1.0407
CAD/JPY		78.56			78.79
CAD/CHF		0.9474			0.9432
CAD/HKD		7.6476			7.6486
CAD/CNY		6.356			6.348
CAD/MXN		13.16			13.177
Commodities
Gold		$1,618.93			$1,617
OIL		$88.13			$87.07
Option Volatility
Canada
O/N		14.05%			11.53%
1 Week		9.19%			9.04%
1 Month		8.72%			8.86%

Today's Economic Calendar

USA
ADP Employment Report  for June(08:15)
ISM Manufacturing for June (10:00)

CANADA
None