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Editors’ Picks

EUR/USD hits fresh one-month low amid souring market mood

EUR/USD has been extending its falls and dips below 1.21 as US retail sales badly disappointed and the worsening mood is supporting the safe-haven dollar. Markets digest Biden's stimulus plan. US Consumer Sentiment declined to 59.2 points. 

EUR/USD News

GBP/USD retreats toward 1.36 amid fresh dollar strength

GBP/US has pared its gains and falls toward 1.36 as the dollar gains ground. The UK economy shrank by 2.6% in November, better than estimated. The UK is ramping up its vaccination campaign and PM Johnson is pressured to ease the lockdown. 

GBP/USD News

Gold extends sideways grind near $1,850

The XAU/USD pair registered small daily gains on Thursday but struggled to extend its recovery amid a lack of significant fundamental drivers on Friday. As of writing, the pair was up 0.15% on a daily basis at $1,849.

Gold news

Forex Today: Markets “sell the fact” on Biden's stimulus, dollar rises, retail sales eyed

Markets are on the back foot after Biden hinted about tax hikes while introducing stimulus. The safe-haven dollar is edging higher despite Powell's pledge to keep monetary policy accommodative. 

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DXY breaks above key downtrend, eyes move above 91.00

USD has been strongly supported on what has shaped up to be a very much risk off final trading day of the week. Most G10/USD pairs have seen significant weakness, aside from CHF/USD and JPY/USD, given that the two currencies are also considered “safe havens”.

US Dollar Index News

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USD/CAD, THE “LOONIE”

The USD/CAD tells the trader how many Canadian dollars (the quote currency) are needed to purchase one U.S. dollar (the base currency). This currency pair is known as the "Loonie", a nickname derived from the picture of a loon, a distinctive bird which appears on one side of Canada's gold-coloured, one Dollar coin.


THE IMPORTANCE OF OIL FOR THE LOONIE

The USD/CAD is one of the three so-called “commodity pairs”, together with AUD/USD, NZD/USD, highly correlated to commodity (especially oil) fluctuations.

Canada is commonly known as a resource-based economy being a large producer and supplier of oil. The leading export market for Canada is by far the United States making its currency particularly sensitive to US consumption data and economical health.


FORECAST FOR 2021

In the annual forecast, our surveyed contributors expect the USD/CAD to reach 1.2392 by the end of the year.

Western Europe and the US can probably expect a drop in growth in the first quarter as the renewed closures for coronavirus countering hamstring economic activity. But once the recovery is underway Canada's large resource and oil-export industries will profit as commodity and oil prices continue higher returning to historical norms for a global expansion. Check out the full forecast


ASSETS THAT INFLUENCE USD/CAD THE MOST

  • Commodities: oil but also gold and natural gas are to be taken into account.
  • Currencies: JPY and EUR. This group also includes: EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD, GBP/JPY and EUR/JPY
  • Bonds: CSB (Canada Savings Bonds), CPB (Canada Premium Bond).
  • Indices: S&P/TSX Capped Composite Index (the headline index for the Canadian equity market), S&P/TSX Global Gold Index (index of global gold securities) and S&P/TSX Capped Energy Index (benchmarks for related derivative products of Canadian economic sectors).

ORGANIZATIONS, PEOPLE AND ECONOMIC DATA THAT INFLUENCE USD/CAD

In Canada, the organizations and people that affect the most the moves of the USD/CAD pair are:

  • Bank of Canada (BoC, Canada’s Central bank) that promotes a safe and sound financial system within tyhe country, issuing statements and deciding on the interest rates of the country. Its president is Tiff Macklem.
  • Canadian Government (headed by Justin Trudeau) and its Department of Finance that implement policies that affect the economy of the country.
  • CAPP (Canadian Association of Petroleum Producers): Canada being a prominent oil and natural gas producer, the trade organization of that industry is very important.

In the USA, we have:

  • The US Government (and its President Donald Trump): events as administration statements, new laws and regulations or fiscal policy can increase or decrease the value of the US Dollar and the currencies traded against it, in this case the Canadian Dollar.
  • Fed, the Federal Reserve of the United States whose president is Jerome Powell. The Fed controls the monetary policy, through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis.

In terms of economic data, we should highlight the Trade Account Balance, a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the USD/CAD. If a steady demand in exchange for CAD exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the CAD.

Inflation is another economic value that is important for the USD/CAD pair. It is measured among others by the CPI (Consumer Price Index) and the PPI (Production Price Index). They are key indicators to measure inflation and changes in purchasing trends.