GFX Morning FX Commentary October 9th, 2013

Good Morning,

Today’s expected range for the Canadian Dollar against the US Dollar is 1.0340-1.0400

Today’s expected range for the Canadian Dollar against the Euro is 1.4000-1.4075

Today’s expected range for the Canadian Dollar against Sterling is 1.6530-1.6600

The US Dollar is stronger against the EURO and Sterling this morning as poor economic news out of the UK helped to push those currencies lower. In the UK the Pound slid to a two-week low against the Greenback after a report showed that UK industrial Production fell in August, this puts an end to the string of impressive economic news out of the UK and highlights what I was saying yesterday that the UK economy cannot justify such a strong currency. On this release GBP.USD fell from 1.6060 to trade at 1.5960 so a full drop of a hundred points. The Euro fell in sympathy with the Pound and traded down to 1.3520 it’s lowest level in a few days.

Yesterday afternoon saw the Washington rhetoric heat up once again with Obama giving a big press conference and then Speaker Boehner giving his rebuttal, their positions are entrenched as ever and at the moment there is no immediate sign of the Government getting back to work or the debt ceiling crisis being resolved. With stocks down over 100 points for the 2^nd day in row evidence is growing that Americans are getting worried that this fight may not get resolved, this fear will increase the closer we get to the 17^th when the debt ceiling will be reached, the Government will have a bit of money to survive until the end of the month but at that point they will be in a default position. I still can’t allow myself to believe this will happen, It will be financial Armageddon affecting us all, not just the Americans, as we get closer to the date the more nervous markets will get and the more volatile they will become.

On a positive note Obama has said he will nominate Janice Yellen to replace Ben Bernanke as Chairman of the Federal Reserve at the end of year. The makers should like this choice as she is seen to be in the same light as Bernanke and will keep stimulus in place as long as necessary. Her appointment will now face a vote in the House and Senate to get her approval confirmed.

The Canadian Dollar is weaker over the last 24 hours as it weakened off as Obama was speaking yesterday, this just highlights the fact that this current crisis will not be a positive situation for the Canadian Dollar. The Loonie will get lumped in with the Greenback and will continue to weaken as long as this crisis remains front and center. I was asked yesterday if the US defaults what would happen to USD.CAD and my experience tells me that we would see enormous volatility and quite possible a USD.CAD rate hitting 1.1000, but again I still can’t allow myself to believe that this would ever happen.

Up today we do get the release of the minutes from the last Federal Reserve meeting and markets will look at the vote on the stimulus program to get a sense of what the Fed is thinking. Given the current situation I don’t think the minutes will have much bearing on the market today as the situation has changed dramatically since the last meeting, I still look for USD.CAD to gradually approach the 1.0400 level. US Dollar buyers are taking a great risk in not grabbing some Dollars at current levels, we should see the US Dollar under continued pressure over the short-term.

Have a great day

Mike

GFX Morning Currency Rates
Currencies	7:00am Today's Opening				Yesterday's Opening
USD/CAD		1.0372			1.0316
CAD/USD		0.9661			0.9694
EUR/USD		1.3522			1.357
EUR/CAD		1.4028			1.4001
STG/CAD		1.6574			1.6593
AUD/CAD		0.9807			0.9793
CAD/JPY		93.8			94.07
CAD/CHF		0.8771			0.8764
CAD/HKD		7.4702			7.5108
CAD/CNY		5.8975			5.9308
CAD/MXN		12.7131			12.7066
Commodities
Gold		$1,312.00			$1,322.00
OIL		$103.53			$103.78
US DOLLAR INDEX
P.CLOSE		80.07			80.02
OPEN		80.4			80.07
US 10YR YIELD		2.62%			2.64%