GFX Morning FX Commentary July 11th, 2013

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is 1.0350-1.0450

Today’s expected range for the Canadian Dollar against the Euro is 1.3570-1.3670

Today’s expected range for the Canadian Dollar against Sterling is 1.5720-1.5820

The US Dollar is significantly weaker this morning as the world’s financial markets react to the minutes from the US Federal Reserve meeting and comments from US Federal Reserve Chairman Bernanke yesterday afternoon. The release of the minutes showed that committee members are divided on the tapering of stimulus, half want to start soon and the other half want to wait until the employment picture gets better. Taking questions after his speech yesterday Bernanke made it quite clear that interest rates and stimulus are not going anywhere until unemployment in the US recovers to 6.5% and even then that number is not a trigger to end stimulus but a new level where they will assesses what the economy needs, “Highly accommodative monetary policy for the foreseeable future is what's needed in the US economy" is the quote that got everybody’s attention.

Given that the markets were expecting the Fed to start tapering the stimulus sooner than later this announcement got everybody by surprise and the markets went crazy, the US Dollar was smashed, equity markets around the world rose, gold jumped 3% and funny enough 10-year US interest rates remained steady, I thought they would have dropped off. In Europe EURO.USD rose to trade at 1.3208 and GBP.USD rose to trade at 1.5175, currency markets can be describes as having extreme volatility at the moment, both of these currency pairs have dropped 100 points from their overnight high, we should be in for more of this today.

The Canadian Dollar was able to benefit from the Bernanke comments, when we went home yesterday afternoon the inter-bank rate was above 1.05000 and at one point last night got near 1.0350, one of the most volatile nights the Loonie has had in months. All of this is in reaction to the comments from Bernanke and the expectation from investors who were expecting a tapering of stimulus by the Fed. Given that over a week ago it looked like USD.CAD was going to trade above 1.0600 and now we are back near 1.0400 in quick order, I think US Dollar buyers need to get on the bandwagon and get some US at these cheaper levels.

Up today we only get some secondary US trade data so the markets will settle in and find new levels to trade at, given that equities and gold will all be much higher today, I would not be surprised if USD.CAD starts to fall below 1.0400 at some point. If you need to sell some USD in the near future look for pullbacks towards 1.0425/1.0450 to leave your orders.

Have a great day

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.038			1.0515
CAD/USD		0.9634			0.951
EUR/USD		1.3069			1.2817
EUR/CAD		1.357			1.348
STG/CAD		1.5713			1.566
AUD/CAD		0.9574			0.9682
CAD/JPY		0.9552			95.17
CAD/CHF		0.9132			0.9214
CAD/HKD		7.4472			7.3545
CAD/CNY		5.9043			5.8312
CAD/MXN		12.3544			12.2935
Commodities
Gold		$1,283.00			$1,252.00
OIL		$106.09			$104.68
US DOLLAR INDEX
P.CLOSE		84.2			84.85
OPEN		83.16			84.53
US 10YR YIELD		2.68%			2.63%