Daily FX Commentary, November 8, 2011
Tuesday, November 8, 2011 at 4:30PM
By Warren Hayhoe,
Columnist, Canadian Money Magazine
Expected USD/CAD range: 1.0080-1.0200
Expected GBP/CAD range: 1.6250-1.6400
Expected EUR/CAD range: 1.3900-1.4080
Expected GBP/USD range: 1.5950-1.6100
Expected EUR/USD range: 1.3700-1.3900
Expected USD/JPY range: 77.00-79.00
Oil opened at $95.52 currently $96.20Gold opened at $ 1791.10, currently $1792.90
Morning Observations:
Another day spent waiting for new developments from Europe have global markets stuck in recent ranges for now. It looks like PM Papa will be passing the torch today to PM Papa II (Lucas Papademos) who will act as the interim leader of the coalition government of Greece. However, the world does not seem to care any longer as the far bigger problem (at least one of them) is going from bad to worse as investors continue to sour on Italy. Everyone is talking about their 10yr bill which has seen its yield go from 4.9% in August to an ominous 6.66% yesterday. The level at which is thought to be unsustainable is subjective but more so than the current rate; is the rate of change that is most concerning (see chart below). The deterioration of demand for Italian bonds has helped the likes of Germany and UK paper but has put pressure on other weak points like Spain and Portugal. If we are to get any reprieve today it will likely come from the Italian confidence vote which takes place today at 9:30am EST. Should Berlusconi lose his capacity for a majority government in parliament today (needing 316 seats out of a 630-seat house) then expect him to either step down immediately or face a confidence vote to determine his fate. Either situation will be viewed as a positive by markets.
Who’s tired of reading about Europe? Perhaps I should have lead with that question as those who made it this far down the page likely aren’t. The thought of starting another commentary with overnight developments of the political landscape in the EU has me depressed.
A little closer to home, our Canadian dollar failed to add to yesterday afternoon gains overnight and instead drifted back to the well traveled 1.0120-1.0185 range. Given the continued strength in the commodity markets the Loonie is conceivably underperforming through the major crosses. Notwithstanding a shock to the system today from Europe we should see the Loonie retain healthy demand and test the overnight highs. It’s another light day on the data front with only CA housing starts at 8:15am to look forward to. Expected range in USDCAD: 1.0080-1.0200
Thought of the Day
“Man needs difficulties; they are necessary for health.”
Carl Jung
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