The US dollar starts the week at around 1.277 after trading as low as as 1.263 last Thursday — a quick gain of 1.5 pennies over two days. The US markets are closed for a national holiday but the reversal comes as the overall environment leans in favour of risk aversion around the world. The US currency also gained overnight as various media reports indicated that the Biden administration would explicitly reverse the Trump-era policy of seeking a lower US dollar to gain competitive advantage in global trade. Further pressuring the Canadian dollar has been worries about the fate of the Keystone XL pipeline which have been percolating since Friday. The CBC reported this morning that Biden intends to revoke that permit in one of his first actions after taking office this week, which would further bottleneck Canadian crude to the U.S. Gulf Coast. The domestic economy will be in focus on Wednesday when the Bank of Canada provides its Monetary Policy Report. No rate changes are expected but we will be watching closely for further indications of the Bank’s intended actions and timing in the future. Canadian housing starts in December were in line with expectations.
