AS: Canadian dollar to benefit as this feels like a risk-on session
"This has the obvious feel of a risk-on session in the making, implying scope for more CAD gains on the crosses, but we are sceptical that much has really changed in the past couple of hours" - Shaun Osborne at TD Securities.
It feels like a risk-on session but Canadian dollar unable to capitalise against EUR and GBP
The Canadian dollar (Currency:CAD) is falling towards parity this afternoon, however the risk-on environment has failed to assist the CAD against the euro and pound:
The pound Canadian dollar exchange rate is 0.54 pct in the blue at 1.5827.
The euro Canadian dollar exchange rate is 0.41 pct higher at 1.2400.
The US dollar to Canadian dollar is 0.75 pct down at 1.0080.
"This has the obvious feel of a risk-on session in the making, implying scope for more CAD gains on the crosses, but we are sceptical that much has really changed in the past couple of hours, apart from prices being marked up on the screens," says Shaun Osborne at TD Securities.
ECB President Draghi caught a market that was short EUR on the hop with some positive-sounding comments just as the North American session was gearing up, forcing quite a squeeze on positions.
"But it remains to be seen exactly what Draghi’s remarks that it is “within the ECB’s mandate to do whatever it takes to preserve the EUR” and that it has “enough firepower” to do so really mean. Frankly, this is stating the obvious. The only crumb that the markets could perhaps really take away from the comments was the inference that it may act to curb risk premium on sovereign bonds (i.e. reactivate the dormant SMP) if spreads were seen to be affecting the transmission of monetary policy – a qualified statement at best," says Osborne.
The pound will be playing catch-up after yesterday's strong sell-off in the wake of the UK GDP release.
It would seem that investors are starting to agree with analysts who say the official figures are way-off the vast majority of other economic indicators.
If this is the case then the next quarter will see a rebound significant enough to keep the Bank of England away from the money printing buttons.
