The Canadian dollar has traded in an unusually wide range of nearly 2 pennies in the first two trading days of 2021 and it has has fluctuated wildly within that range. The volatility has had various causes. For example, yesterday, the Canadian dollar started the morning at the low end of that range but quickly gained a cent in response to soaring oil prices resulting from supply cuts announced yesterday by Saudi Arabia. The rise in oil prices comes on top of already firm energy prices caused by tensions in the Persian Gulf between the US and Iran. The Canadian dollar gained even further in the day as field reports began indicating that the Democrats could take control of the Senate and the USD weakened broadly. Of course, Democratic control of the Senate is a double-edged sword for the Canadian dollar. If it leads to further regulation (especially in the tech world) and lower stock prices then that could cause weakness in the Canadian dollar which has been heavily correlated to stock prices recently. There is some more political theatre expected today with Trump allies challenging Biden’s election but no one expects that effort to succeed and the US political picture is now settled as far as the markets are concerned. In Canada, we will be watching tomorrow’s PMI and Balance of Trade numbers.
