GFX Morning FX Commentary Oct 19th, 2012

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is .9830-.9930

Today’s expected range for the Canadian Dollar against the Euro is 1.2860-1.2960

Today’s expected range for the Canadian Dollar against Sterling is 1.5820-1.5920

The US Dollar is marginally stronger this morning as the EU Summit has really failed to produce any meaningful results to keep investors happy. The biggest news was that they want the European Central Bank to be the main regulator of all European banks, this would take some of the sovereignty away from the individual countries and put the ECB up front for any future bank bailouts. In addition the Finance Ministers congratulated the Greek Prime minister for all his efforts in trying to reach the countries austerity goals, they needed a big meeting costing millions of dollars just to congratulate the Greek Prime Minister, they did not offer him an extension to pay back the loans just congratulated him, and we wonder why Europe is a mess.

Yesterday saw the Canadian Dollar give back all its gains from Wednesday and it was primarily on the media statement made by Finance Minister Flaherty  that the Canadian recovery may not be as robust as first thought, I could just see his deficit reduction targets flying off into the wind. The expectation is now building that next Tuesday when the Bank of Canada release its interest rate policy it may become a little more dovish on the economy and put off any interest rate hikes until 2014, it will be an interesting statement. Overnight USD.CAD continues to push a little higher but for the most part all the damage was done yesterday afternoon.

Up today we get the Canadian CPI report for September and with inflation in check I would not expect it to have much of an effect on the currency market, we do also get US existing home sales and again I would think we will continue  to see strong numbers from the US which will help to keep equity markets moving higher. I still favour a stronger Canadian Dollar but if the Canadian economy is going to slow down dramatically as Flaherty is hinting at, then I may be forced to change that view. For now I think these levels reflect a good opportunity for US Dollar sellers.

Have a great day

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		0.9868			0.9773
CAD/USD		1.0134			1.0232
EUR/USD		1.3046			1.3108
EUR/CAD		1.2879			1.2813
STG/CAD		1.5848			1.5785
AUD/CAD		1.0223			1.0157
CAD/JPY		80.24			81.05
CAD/CHF		0.938			0.9432
CAD/HKD		7.8312			7.9069
CAD/CNY		6.3342			6.3928
CAD/MXN		13.0545			13.1032
Commodities
Gold		$1,735			$1,747
OIL		$92.18			$92.02
Option Volatility
Canada
O/N		6.50%			9.23%
1 Week		7.25%			6.74%
1 Month		7.25%			6.47%