GFX Morning FX Commentary, June 21st, 2012

Good Morning,

Today's expected range for the Canadian Dollar against the US Dollar is 1.0150-1.0250

Today's expected range for the Canadian Dollar against the Euro is 1.2900-1.3025

Today's expected range for the Canadian Dollar against Sterling is 1.5970-1.6100

The US Dollar is marginally stronger in very quiet trading ranges this morning as the Euro has fallen back a slight bit on poor economic data out of the EU. Yesterday saw the US Dollar jump in the afternoon but again only slightly as the US Federal Reserve kept interest rates at 0.25% but did announce that they were would continue their "Twist" program until the end of the year. This program see the Fed buyback long-term debt from the market and issue more short-term debt at lower interest rates. I think the market was hoping for more from the Fed as the equity markets were all lower right after the announcement. Tied in with this announcement is the fact the Fed lowered their growth forecast for the coming year so clearly the US recovery is stalling.

The Canadian Dollar continues to be ignored by the overnight markets, it continues to trade around the 1.0200 level in very tight ranges, the Loonie was stronger yesterday before the Fed announcement but gave up some gains shortly after. It looks now that USD.CAD will trade around 1.0200 for the next few days.

Falling under the radar this morning is the Federal Government announcement that they are reducing the maximum amortization period for a home mortgage from 30 years to 25 years in response to the overheated Canadian housing market. Given the worry that the Bank of Canada has with the current level of consumer debt in Canada and the rise of a possible housing bubble should they raise interest rates, the Government is trying to take the necessary steps to slowly cool off the housing markets. This announcement should add between 9-12% to the average mortgage payment so it is clearly a significant step. The question is will the Bank of Canada follow up with an interest rate hike at the end of the year to further dampen the housing market, given the current state of the world economy I think they will hold off but it is something to watch.

Up today we get the release of Canadian Leading indicators for May and Retails Sales for April, while a lagging number if the Retail Sales comes in worse than the 0.3% expected gain we may see USD.CAD break above the 1.0200 level.

Have a great day

Mike

GFX Morning Currency Rates
Thursday June 21, 2012
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0206			1.0174
CAD/USD		0.9798			0.9829
EUR/USD		1.2669			1.2687
EUR/CAD		1.2932			1.2905
STG/CAD		1.605			1.6006
AUD/CAD		1.0377			1.0371
CAD/JPY		78.22			77.57
CAD/CHF		0.9281			0.9296
CAD/HKD		7.7393			7.6208
CAD/CNY		6.233			6.2485
CAD/MXN		13.4397			13.4547
Commodities
Gold		$1,599			$1,613
OIL		$80.78			$84.03
Option Volatility
Canada
O/N		13.00%			15.29%
1 Week		9.50%			10.06%
1 Month		9.30%			9.66%

Today's Economic Calendar
USA
Existing Home Sales for May (10:00)
Leading Indicators for May (10:00)
Philadelphia Fed Index for June (10:00)

CANADA
Leading Indicators for May (08:30)
Retail Sales for April (10:00)