Daily FX Commentary, November 9, 2011
Wednesday, November 9, 2011 at 4:10PM
By Warren Hayhoe,
Columnist, Canadian Money Magazine
Expected USD/CAD range: 1.0150-1.0300
Expected GBP/CAD range: 1.6250-1.6400
Expected EUR/CAD range: 1.3875-1.4050
Expected GBP/USD range: 1.5900-1.6050
Expected EUR/USD range: 1.3550-1.3750
Expected USD/JPY range: 77.00-79.00
Oil opened at $96.80 currently $95.45Gold opened at $ 1799.20, currently $1792.90
Morning Observations:
Yesterday Italy’s Berlusconi lost his majority and offered to resign following the passing of austerity measures by parliament later this month. As mentioned yesterday, this was market positive and we did see bond prices rise and the euro gain but the optimism was short lived. We come in this morning to a far worse picture than we left as Italy’s yield curve has inverted and the 10yr yield is now trading close to 7.5%! You will be hard pressed to find a person (at least a sane one) that will defend the current conditions as sustainable and at some point (likely in the very near future) you will likely see the ECB come back in and start buying. Whispers of a ECB QE are starting to grow and will continue to grow as the contagion spreads (buy gold in euros?!). I’ve attached a snapshot below of most of Europe’s 10yr bond market this morning and it’s easy to see where the market worry is (1. Italy, 2. Spain, 3. France). The euro has not gone without notice and has moved off its 1.3860 overnight high to a current 1.3620 low. European equity markets are all deep in the red this morning and North America is set to open the same. There’s no avoiding the bad news this morning as even China joined in, posting softer than expected inflation figures and indicated that monetary easing was not in the cards immediately. Finally, throw in growing concerns of a nuclear conflict in the Middle East and it’s enough to drive a person to drink!
Closer to home USDCAD lifted off from the overnight lows of 1.0080 to current levels just over 1.0200. The 1.0230/50 level will have to be pierced before we are comfortable in calling for the 1.03’s but at the rate we’re going it looks probable. Another day without any notable data pieces puts the focus squarely on Italy and we will look towards equity markets for direction today. Be particularly nimble as headlines typically start to fly when we get abrupt moves like we have today, expected range in USDCAD: 1.0150-1.0300
Thought of the Day
“The reason they call it the American dream, is that you have to be asleep to believe it."
George Carling
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