GFX Morning FX Commentary March 25th, 2013

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is 1.0160-1.0240

Today’s expected range for the Canadian Dollar against the Euro is 1.3220-1.1.3300

Today’s expected range for the Canadian Dollar against Sterling is 1.5500-1.5570

The US Dollar is weaker this morning as the effects of the Cypriot bailout emerge. The details of the bailout are a bit sketchy yet but it looks like that the Troika (EU, ECB and the IMF) will provide funding to Cypriot banks, Cyprus remains in the EU, one of the Cypriot banks will be closed with deposits moving to another bank and a tax on all deposits accounts over 100K Euro in the failed Bank Popular will be implemented, I have read the tax could be as much as 40% but that is still yet to be confirmed. This deals saves the Cypriot banking system but will immediately plunge the island economy into recession, one report that I read said that by 2017 Cypriot GDP will fall by 20%. The rest of Europe seems to like the deal with equities all higher this morning and the Euro had an initial boost but has fallen back a bit to where it closed on Friday.

My problem with this type of bailout is now the Genie is out of the bottle, if you are sitting in Italy and Spain this morning and you have 100k Euro in your account what are you going to do, I would certainly be looking at  getting my savings out of the country, I would not feel very comfortable leaving my savings in Europe at the moment. If we see this starting to happen Canada will see a net inflow of money coming into the country.

The Loonie was able to garner some strength out of all this against the USD but is basically flat against the Euro, given that the Loonie is stronger because of the Cyprus situation I would not be convinced that this move will continue in the short-term, it may present a good opportunity for US Dollar buyers.

With no economic releases today I look for a muted USD.CAD trading range, if US Dollar buyers see the rate below 1.0200 I think they should look at buying some USD as we may not be here long.

Have a great week

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.019			1.0249
CAD/USD		0.9813			0.9757
EUR/USD		1.3001			1.2939
EUR/CAD		1.3248			1.3264
STG/CAD		1.5497			1.5582
AUD/CAD		1.069			1.0694
CAD/JPY		92.96			92.17
CAD/CHF		0.9225			0.9271
CAD/HKD		7.596			7.5518
CAD/CNY		6.0931			6.0558
CAD/MXN		12.1056			12.1089
Commodities
Gold		$1,601			$1,610
OIL		$94.22			$92.67
US DOLLAR INDEX
P.CLOSE		82.53			83
OPEN		82.48			82.79