GFX Morning FX Commentary, June 6th, 2012

Good Morning,

Today's expected range for the Canadian Dollar against the US Dollar is 1.0280-1.0380

Today's expected range for the Canadian Dollar against the Euro is 1.2890-1.3000

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

The US Dollar is weaker this morning as investors seem to be satisfied for now that the G7 will assist Europe and give them the help they need to get through the latest crisis. In his interview with Peter Mansbridge of the CBC, Prime Minister Harper stated that the world economy cannot let a Greek default bring it down and he is 100 percent correct, it is nice to see that the G7 is hopefully getting their heads around this. The US Dollar was also hit on great GDP news out of Australia as that economy reported some great growth rates. It is comforting to see that it is not just Canadian economists who can’t get anything wrong, all the predictions for the Aussie growth rates were for a lot less than the actual number, I wonder how sometimes these people keep their jobs.

EURO.USD was able to push back above 1.2500 last night and will now await the announcement of the ECB interest rate policy and then President Draghi's press conference on the state of the European economy. There are many economists calling for an interest rate cut in Europe but I am not convinced that will happen today. As I write the ECB has announced that they are keeping interest rates at 1.0%, the press conference is to follow later this morning.

With some stability coming to the Euro for the moment USD.CAD moved lower overnight but has bounced off of its lows and is trading a bit higher to start the day. Given that this move higher (.9800 to 1.0375) for USD.CAD was all rooted in Europe I am not that surprised to see it lower now that things have started to settle down. When you have the situation in Europe calming down and the Bank of Canada saying yesterday that interest rate hikes are still in the works then a picture for a stronger Loonie can still be painted,  A conservative hedging strategy for US dollar sellers would have them putting on some forward contracts at current levels, US Dollar buyers may see a pullback lower but given the current situation in the world I would not risk waiting for any move back to parity.

With North American markets expected to have a strong day barring any surprises from the ECB and Draghi's  comments I would expect USD.CAD to trade lower today.

Have a great day

Mike

GFX Morning Currency Rates
Wednesday June 06,2012
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0327			1.0406
CAD/USD		0.9683			0.961
EUR/USD		1.2495			1.2436
EUR/CAD		1.2907			1.2942
STG/CAD		1.5998			1.5974
AUD/CAD		1.0184			1.0127
CAD/JPY		76			75.13
CAD/CHF		0.9296			0.9272
CAD/HKD		7.5055			7.4492
CAD/CNY		6.1611			6.1156
CAD/MXN		13.7024
Commodities
Gold		$1,637			$1,619
OIL		$85.44			$83.88
Option Volatility
Canada
O/N		11.00%			15.48%
1 Week		10.00%			11.91%
1 Month		10.14%			11.76%

Today's Economic Calendar

USA
Productivity Report for Q1 (08:30)
Beige Book Report on the Economy (14:00)

CANADA
None