GFX Morning Commentary Oct 11th, 2012

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is .9750-.9850

Today’s expected range for the Canadian Dollar against the Euro is 1.2620-1.2720

Today’s expected range for the Canadian Dollar against Sterling is 1.5670-1.5770

The US Dollar is marginally weaker this morning as events in Europe continue to develop pushing Spain to the brink of requesting a bailout. This morning S&P downgraded Spanish Bonds to one level above junk which will make it much more difficult for Spain to raise funds on the open market, also this morning IMF President Lagarde stated that Greece should be allowed another 2 years to reach their budget targets so that they can focus on growth, this statement puts the IMF and Germany on a collision course as the Germans are deeply opposed to any changes in the terms of the Greek bailout. I get a sense that financial markets are pushing Spain towards the bailout and like this idea which would bring some measure of  stability to the Euro region. Whenever we see the expectation rising for a Spanish bailout equities jump higher and the Euro gets stronger.

Another factor helping the Euro recover last night was a rise in EURO.JPY. There is growing expectation that the Bank of Japan will intervene in the currency markets to sell the Yen (buy USD) to bring its value down. Right now USD.JPY is very weak and the strong yen is hurting the Japanese export market. We are now seeing more and more countries (especially emerging countries) commenting that the US QE 3 program is hurting their exchange rate and affecting exports, central bank intervention may be an increasing theme for 2013.

The Canadian Dollar continues to trade around the .9800 level without any real sense of direction at the moment. The Loonie keeps getting its intra-day direction from the equity markets, when risk is on and equities are higher  USD.CAD will move lower (as it did last night) and when risk is off and equities are lower, USD.CAD will jump higher. Until we see a trend develop this will remain the best indicator for the Loonie.

Up today we do get some trade data out of the US and Canada but for the most part I think the currency markets will ignore these reports, we won’t see any new trends in the Canadian markets develop until the Spanish situation is resolved. With equities pointing higher to start the day look for USD.CAD to move back towards the .9775 level.

 

Have a great day

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		0.9789			0.9782
CAD/USD		1.0215			1.0223
EUR/USD		1.2909			1.2864
EUR/CAD		1.2638			1.2584
STG/CAD		1.5693			1.5652
AUD/CAD		1.0067			1.0009
CAD/JPY		79.92			79.98
CAD/CHF		0.955			0.9613
CAD/HKD		7.8978			7.9192
CAD/CNY		6.405			6.4835
CAD/MXN		13.2044			13.1682
Commodities
Gold		$1,772			$1,764
OIL		$92.03			$91.90
Option Volatility
Canada
O/N		10.13%			10.38%
1 Week		6.74%			7.09%
1 Month		6.70%			6.85%