GFX Morning FX Commentary

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 1.2525-1.2625

Today's expected range for the Canadian Dollar against Sterling is 1.5770-1.5900

The US Dollar is again stronger this morning as EURO.USD has hit a two year low. The combination of poor US jobs data on Friday and dovish economic comments by the Chinese Premier have pushed equities lower again and pushed the US Dollar higher this morning.  Premier Wen Jiabao’s statement that “downward pressure on the economy is still relatively large” spooked equity markets and pushed the US dollar higher, with inflation in China running at the lowest level it has in years (if you can believe the Chinese Governments numbers on the economy) there is speculation that the Central bank will cut interest rates and ramp up liquidity to help support growth. The nervous markets continued into Europe as regional financial ministers are meeting in Brussels to try and figure out the best way to implement the EU polices that were decided on last week, Spanish bonds yields were also above 7% again this morning so still tough sledding for the Euro ahead.

In North America, US Federal Reserve member Rosengren made the comment last night that QE 3 was a definite possibility given the current situation, given the poor numbers out of the states recently we should see the rhetoric heat up in the coming weeks on what the Fed will do to support the company. As mentioned before I think the Federal Reserve will act sooner than later as they don’t want to be seen influencing the Presidential election.

The Canadian Dollar is marginally weaker from Friday’s close as USD.CAD looks like it wants to go higher and pass through the 1.0200 level. Up today we do get the Bank of Canada Business outlook survey at 10:30 which could bring some volatility to the market if they paint a weaker picture on the economy since they last reported. Today is the start of the Government’s new mortgage rules so I will be watching the Canadian housing numbers over the next couple of months to see if the rules are creating the desired slowdown in the housing market (especially in the Toronto condo market. Such a drop could slow down the whole economy and with the economy only creating 7k new jobs last month it won’t take much to turn our growth negative.

For today with North American equity markets opening lower we should see USD.CAD head higher but unless the Bank of Canada surprises the trading ranges should be muted.

Have a great week

Mike

GFX Morning Currency Rates
Monday July 9th, 2012
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0192			1.0153
CAD/USD		0.9811			0.9849
EUR/USD		1.2308			1.5339
EUR/CAD		1.2308			1.2566
STG/CAD		1.5491			1.578
AUD/CAD		1.0279			1.0417
CAD/JPY		78.00			78.64
CAD/CHF		0.957			0.9532
CAD/HKD		7.6034			7.6302
CAD/CNY		6.3723			6.3658
CAD/MXN		13.174
Commodities
Gold		$1,585			$1,592
OIL		$84.79			$85.78
Option Volatility
Canada
O/N		12.40%			9.57%
1 Week		9.12%			9.07%
1 Month		8.83%			8.65%

Today's Calendar

USA
Consumer Credit for May (15:00)

CANADA
BoC Business Outlook Survey (10:30)