Welcome to 2021. The Canadian dollar closed 2020 with an upbeat tone and that theme continued on the first day of trading in 2021. It is not a Canadian dollar story, though. It is a post-pandemic, global economic rebound outlook that is turbo-charging risk sentiment, driving commodities, and commodity currencies higher.
Global financial markets are looking past soaring numbers on new coronavirus cases in various regions. German officials want to extend existing lockdown orders beyond January 10.
Greece announced a one-week lockdown, and Ireland raised its risk to Level 5. The number of new U.S. COVID-19 cases averaged over 220,000 in the past week.
Canada is not unscathed. Canadian politicians are warning citizens to avoid unessential travel, but many believe the warnings are not applicable to them.
Asia equity indexes started the year on a positive note, led by a 3.96% gain in the Shanghai Shenzhen CSI 300 index. Japan’s Nikkei 225 index did not follow that move, and lost 0.69%, due to rumours that authorities would declare a State of Emergency in Tokyo because of soaring COVID-19 cases.
Traders are ignoring the political drama unfolding in the U.S. The Georgia “run-off vote” is Tuesday, and will determine which political party controls the Senate.
Traders are also alert for headlines coming out of today’s meeting of the Organization of the Petroleum Exporting Countries, as some see a risk that the cartel could increase production above the 500,000 barrel/day expected. WTI prices have been choppy inside a $48.18-$49.80/b range and are currently trading at $48.36/b in Toronto (8:00 am ET)
The minutes of the December 16 FOMC meeting will be released on Wednesday. Notably, it is the last meeting for the following Fed presidents: Philadelphia’s Patrick Harker, Dallas’s Robert Kaplan, Cleveland’s Loretta Mester, and Minneapolis’ Neil Kashkari. They are being replaced by Charles Evans of Chicago, Mary Daly of San Francisco, Richmond’s Thomas Barkin, and Atlanta’s Raphael Bostic.
EUR/USD rallied steadily overnight, climbing from a low of $1.2212 in Asia to $1.2300 in Europe.
Prices are hovering near the top of that range in Toronto, supported by firmer equity prices and positive risk sentiment.
There are not any U.S. or Canadian economic reports of note available today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians