GFX Morning FX Commentary November 6th, 2012

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is .9900-.9975

Today’s expected range for the Canadian Dollar against the Euro is 1.2700-1.2800

Today’s expected range for the Canadian Dollar against Sterling is 1.5850-1.5925

The US Dollar is mixed this morning as it has jumped around during the night. The first move for the USD was to get stronger against the Euro (to an eight week high, EURO.USD traded down to 1.2765) on the back of poor German economic data, later in the morning the Greenback then gave up those gains as the EURO jumped above 1.2800 on a reaction to equity markets all moving higher as the financial markets getting ready for the results of the US election, it was a good night for stocks overall.

The Canadian Dollar is stronger this morning but still trades in narrow ranges in between .9900 and parity. The Loonie was helped last night by the Australian Dollar being a lot stronger, the Reserve Bank of Australia was expected to cut interest rates and they unexpectedly kept rates at current levels, the Aussie  jumped higher by 0.7% and the Loonie and other commodity currencies were able to benefit from this move. With the election upon us USD.CAD should have a quiet day today and with North American equity markets pointing higher we may see USD.CAD test .9900 today but I think it should stay above that level.

A few comments on the US Election and how it effect on the Loonie. As a Canadian I am not really a fan of either candidate, but my gut tells me that Obama will win and it won’t be as close as the pundits are calling for. Over the immediate short-term (two or three days after the election) if Obama wins I think it will be positive for equity markets as economic stimulus will continue, the economy will continue to grow at current rates, jobs will continue to be created and investors will know what they are getting. Longer term I think  the bond rating agencies are going to have real issues with the US deficit, and unless the Obama administration takes aim at cutting spending I think you will see equities get hit and the US Dollar will jump higher.

If Romney wins then I think immediately the equity markets get hit on the uncertainty factor and USD.CAD will rush towards parity. Longer term the bond rating agencies will love Romney’s planned slash and burn programs and his plan to get the deficit under control, Canadians will love Romney as he will build all the pipelines and not give a crap about the environment, he will I think be good for Canadian business overall.  I think the world becomes a much more dangerous place with his shoot first and talk later Republican approach, and has he moves further into his term and reduces the deficit,  stimulus will be removed from the economy  and equities will have trouble moving forward, it will take him a number of years to get spending under control before we will see real growth in the US economy.

Whatever happens tonight I think the currency markets will see enhanced volatility (more so if Romney wins) so make sure you have your orders in. If we do get a lot of exit polls during the day indicating which way the so called “Swing States” are  going then we could see enhanced volatility during the day. If you are watching the results tonight keep any eye on Ohio and Pennsylvania I think they could give Obama the electoral votes that he needs. 

Have a great day

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		0.9931			0.9969
CAD/USD		1.0069			1.0031
EUR/USD		1.2867			1.2787
EUR/CAD		1.2722			1.2748
STG/CAD		1.588			1.5924
AUD/CAD		1.0368			1.0315
CAD/JPY		80.7			80.22
CAD/CHF		0.9427			0.946
CAD/HKD		7.7808			7.7524
CAD/CNY		6.2966			7.7524
CAD/MXN		13.0797			13.1021
Commodities
Gold		$1,692			$1,680
OIL		$86.29			$84.89
Option Volatility
Canada
O/N		9.45%			9.35%
1 Week		6.99%			6.94%
1 Month		6.55%			6.54%