GFX Morning FX Commentary February 25th, 2013

Good Morning,

Today's expected range for the Canadian Dollar against the US Dollar is 1.0220-1.0300

Today's expected range for the Canadian Dollar against the Euro is 1.3410-1.3480

Today's expected range for the Canadian Dollar against Sterling is 1.5530-1.5600

The US Dollar opens the North American trading session much stronger against the Euro as yesterday afternoon saw the Euro drop as much as 1% against the Greenback (4% against the Yen) on the projected results of the Italian election. I am not quite sure how the Italian parliament works but there appears to be a stalemate with Bersani wining a slim victory in the house and Berlusconi able to block measures in the Senate. This has left European investors very nervous so Italian and Spanish Bond prices have risen, equity markets across Europe are all lower and the Euro has dropped significantly. The Euro has recovered a little this morning but the market still looks very nervous, if it gets this nervous about an Italian election result can you imagine what happens if Merkel gets thrown out later this year in Germany? I expect the Euro trading to be very volatile over the next few weeks.

With the strength in the US Dollar yesterday afternoon the Loonie traded weaker against the Greenback and looked set for a test of 1.0300 but last night it stemmed its losses and was able to pull back towards 1.0250. Given the weakness in the Euro the Loonie was able to  make some gains overnight with EURO.CAD dropping below 1.3500, given the current levels it might not be a bad time for some Euro buyers to take advantage of this weakness, EURO.CAD has been bouncing between 1.3400 and 1.3600 lately so these levels represent good value.

Up today markets will continue to watch developments in Italy as the election results continue to unfold but we also get the release of a lot of US data, including the Richmond Fed index and Consumer Confidence, with the overall strength in the USD and the weakness in the Euro I still favour a short-term test of 1.0300 but if we do get a correction it could be violent and we could see a quick drop below 1.0200 at some point. Regardless USD.CAD should see some enhanced volatility just like the rest of the FX markets.

Have a great day

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0263			1.0227
CAD/USD		0.9744			0.9778
EUR/USD		1.3074			1.3276
EUR/CAD		1.342			1.3581
STG/CAD		1.5542			1.5485
AUD/CAD		1.0515			1.0537
CAD/JPY		89.55			91.63
CAD/CHF		0.9059			0.9043
CAD/HKD		7.5303			7.5623
CAD/CNY		6.0682			6.0921
CAD/MXN		12.5134
Commodities
Gold		$1,590			$1,592
OIL		$92.21			$94.24
Option Volatility
Canada
O/N		5.95%			6.05%
1 Week		7.40%			7.42%
1 Month		6.85%			6.92%