GFX Morning FX Commentary Nov 7th, 2012

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is .9875-.9950

Today’s expected range for the Canadian Dollar against the Euro is 1.2660-1.2760

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

The US Dollar is mixed this morning as the Obama victory pushed overseas equity markets higher, initially the reaction was to push the US dollar lower(EURO.USD jumped to trade above 1.2800) but as North America comes in the Greenback is gaining back those losses as equities are pointing lower (EURO.USD is falling to 1.2750). The Euro is being hit on very poor Industrial Production numbers out of Germany and comments from ECB President Draghi on the German economy, if the German economy is slowing what hope does the rest of Europe’s economy have?

The evening unfolded pretty much as I expected, I was surprised that Romney did not do better in some of the so-called “battleground states” but it is a clear electoral college victory for Obama and a narrow popular vote victory.  The expectation is that the stimulus will continue to push the US economy forward and the status quo will remain in place. The first big hurdle which markets will focus on is the imposing “Fiscal Cliff”, in order to pass the 2011 budget a comprise between the President and Congress was reached that called for massive tax increases and spending cuts (about $600 Billion worth) to take place on December 31^st, 2012. All economists would agree that if this program is put in place growth will be cut in the US by upwards of 4% taking the economy back into recession. The big question is how will the Republican Congress and the Democratic President work to stop this from happening? If they do nothing look for equities to get very nervous and the US Dollar to benefit in the coming weeks, if they come up with a credible plan then equities will continue to push forward and the US Dollar should trade with a weak bias.

The Canadian Dollar staged a brief rally last night and looked like it wanted to break through the .9900 level, but the weakness in the Euro and the strength behind the US Dollar but a quick stop to that rally. USD.CAD is back above the .9900 level for now, if we do see a rally in equities today then we may yet see USD.CAD move lower. We will be keeping a close eye on these upcoming fiscal cliff negotiations as they will have an big effect on Canada. If the situation is not resolved then the US will start to move back into a recession and that will drag the Canadian economy along with it, the next few weeks and months are going to be very interesting.

On a personal note I just wanted to thanks to everyone for the kind comments regarding my operation and recovery. I am sad to say that my recovery is almost complete (I am about 80% there) and I will be heading back to the office tomorrow rejoining the rate race, over the last 7 weeks I had a 30 second commute to my home office and worked in my pajamas, that is something I could get used to. On a serious note if anyone is considering a joint replacement I have found it to be an amazing experience, I am pain free and enjoying walking again, don’t wait, you will see a big difference.

Have a great day.

 

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		0.99			0.9931
CAD/USD		1.01			1.0069
EUR/USD		1.2816			1.2867
EUR/CAD		1.2687			1.2722
STG/CAD		1.5827			1.588
AUD/CAD		1.0324			1.0368
CAD/JPY		81.06			80.7
CAD/CHF		0.9513			0.9427
CAD/HKD		7.8088			7.7808
CAD/CNY		6.3133			6.2966
CAD/MXN		13.0681			13.0797
Commodities
Gold		$1,724			$1,692
OIL		$87.88			$86.29
Option Volatility
Canada
O/N		9.50%			9.45%
1 Week		6.90%			6.99%
1 Month		6.50%			6.55%