GFX Morning Commentary March 21st, 2013

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is 1.0180-1.0260

Today’s expected range for the Canadian Dollar against the Euro is 1.3170-1.3250

Today’s expected range for the Canadian Dollar against Sterling is 1.5510-1.5600

First this morning my apologies,  yesterday I had an error in the expected range with the high being 1.2280, which should have of course been 1.0280. I wish it had gone to 1.2280 I would have had a very busy day. Thanks to all readers who pointed that out without any sarcasm ;)

The US Dollar is mixed this  morning as it is stronger against the Euro and weaker against Sterling. In Europe the Euro is weaker after a manufacturing report out of Germany showed a much bigger decline than expected, it certainly looks like Germany is still in their recession which will only hurt Merkel’s chances of re-election this fall. The reports yesterday that a Russian investment in a Cypriot bank was quickly denied by the government so Cyprus still remains a mess after the Parliament turned voted down the EU bailout package that would tax deposit accounts. The EU has said they will provide funding only until March 25^th where the Cypriot government will have to find more funding on international markets (aka Russia) or the banking system will collapse. The Cypriot people may have no choice but to take the 10% tax or face losing all their deposits in a bankruptcy, I am not sure if there is any deposit insurance in place to protect depositors.

Sterling is stronger this morning as UK retail Sales for January came in 5 times better than the economist predictions (nice to see it is not only Canadian economists that stink at predictions, GBP.USD jumped to trade at a high of 1.5210, its highest level in weeks.

Just a quick note on the US Federal Reserve yesterday, it was very much a neutral statement with interest rates remaining at .025% and the stimulus program remaining in place as long as inflation does not start to rise and unemployment remains above 6.5%. Currency markets did not react to the report.

The Canadian Dollar had a strong night with USD.CAD dropping to trade back towards 1.0200, in fact all the so-called commodity currencies had a strong night, some of this could be related to an M&A deal where a mining transaction worth a couple of billion CAD may have taken place overnight. Commodity prices did not really jump much higher overnight so this may be the only rational reason for the strong move.

Up today we get a slew of US data and the Canadian Retail Sales report for January in the morning and then the Canadian market will focus on the Federal Budget this afternoon. For the Retail Sales report we are expecting a rise of 0.8% so any number less than this may put the Loonie under pressure once again, Canadian numbers (with the exception of employment) have not been all that strong lately so a disappointing number today may have an adverse effect on the Loonie.

This afternoon the Canadian currency market will focus on what Flaherty has to say about his deficit predictions and the growth rates for the next few years, if it comes out that revenue is drying up and the Government is not willing to cut spending enough to curb the deficit then look for USD.CAD to jump, we should know the reaction by the market shortly after 4:00 when the budget document is released.

Have a great day

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0228			1.0243
CAD/USD		0.9777			0.9763
EUR/USD		1.2918			1.2914
EUR/CAD		1.3213			1.3237
STG/CAD		1.553			1.5508
AUD/CAD		1.063			1.0642
CAD/JPY		93.38			93.07
CAD/CHF		0.924			0.9224
CAD/HKD		7.5683			7.5553
CAD/CNY		6.0725			6.0615
CAD/MXN		12.0716			12.1037
Commodities
Gold		$1,607			$1,610
OIL		$93.11			$92.81
Option Volatility
Canada
O/N		7.00%			6.80%
1 Week		6.28%			6.77%
1 Month		6.09%			6.37%