GFX Morning FX Commentary January 3rd, 2013

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is .9825-.9900

Today’s expected range for the Canadian Dollar against the Euro is 1.2900-1.2975

Today’s expected range for the Canadian Dollar against Sterling is 1.5910-1.6000

This is my first day back in the office after a brief few days off over New Years, on behalf of everyone here at GFX I wish all readers a very successful and prosperous 2013.

Over the Christmas break the fiscal cliff discussions in the US dominated the currency markets with the US Dollar moving higher over the days before January 1^st on the fear that a deal would not be reached, once the deal was reached equity markets jumped and the US Dollar gave back a lot of ground with both the Euro and Sterling jumping higher. In particular the commodity currencies moved more that the major currency pairs, the Canadian Dollar which had been trading weaker the closer the negotiations got to failing quickly and dramatically recovered to move back towards the .9850 level where we were before the Christmas holiday began. The markets over the holiday were busier than they normally would have been and that was due fully to the fiscal cliff discussions.

While there is great relief in Washington that a deal has been reached it will be very short-lived as the US Government is quickly running out of money and the Republicans and Democrats quickly have to get back at each other’s throats in the next few weeks to increase the debt-ceiling so the Government can print more money and stay afloat. I would expect that the Republicans will draw a line in the sand over these discussions and demand major spending cuts, I look for very similar trading patterns to the fiscal cliff negotiations, as we get closer to the drop dead day before the country runs out of money we should see the US Dollar rally and stock markets get nervous and drift lower.  

Outside of these discussions markets will return to normal functions and start to concentrate on economic reports, the first major report of the new year is the employment reports in both Canada and the US due out tomorrow, markets will once again focus on growth in the US and if it can be sustained over the long haul.

For the immediate short-term look for USD.CAD to continue to trade between .9850 and .9900 as the currency markets get a new sense of direction in the coming days.

Have a great day and of course a great 2013.

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		0.9863			0.9847
CAD/USD		1.0137			1.0153
EUR/USD		1.3108			1.3246
EUR/CAD		1.2931			1.3046
STG/CAD		1.5954			1.6054
AUD/CAD		1.036			1.0326
CAD/JPY		88.06			0.8841
CAD/CHF		0.9347			0.9261
CAD/HKD		7.854			7.8655
CAD/CNY		6.3159			6.3248
CAD/MXN		12.9616			12.9865
Commodities
Gold		$1,681			$1,682
OIL		$92.59			$92.99
Option Volatility
Canada
O/N		7.41%			6.58%
1 Week		5.92%			6.97%
1 Month		5.41%			5.70%