Canada Dollar Drops Against Euro After Trichet Strikes Hawkish Note
The Canadian dollar is down sharply against the euro Thursday after European Central Bank President Jean-Claude Trichet sounded a hawkish tone at an ECB news conference.
The euro is trading at C$1.3581 from C$1.3482 late Wednesday, according to data provider CQG, after Trichet signaled that inflationary pressures in Europe are rising.
The ECB left its key rate unchanged at 1.00% earlier Thursday, confirming market predictions.
The Canadian unit has declined modestly against the U.S. dollar in early North American trading after trading in narrow ranges overnight. The U.S. dollar is trading at C$0.9732 from C$0.9724 late Wednesday.
'You haven't seen that much of a major move in the Canadian dollar despite the fact that we did close above $100 in [West Texas Intermediate crude] yesterday,' said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London.
Crude oil prices have receded somewhat from overnight highs after Venezuelan President Hugo Chavez proposed a multinational commission mediate the violent conflict between Libyan leader Moammar Gadhafi and rebel groups.
Gallo said the Canadian dollar is 'finely balanced' between the short-term support from strength in crude oil and the potential risks to global growth if oil prices continue to spike higher.
A gradual increase in oil prices to the $105 to $110 range that doesn't impair global growth will be positive for the Canadian dollar, but a short-term spike to the $125 area would be negative for growth and consequently the Canadian unit, he said.
TD Securities said that with no domestic data on the agenda in Canada, it will be a day of flow-driven moves for the Canadian dollar.
'Overnight trading has been fairly quiet but the broader backdrop looks a little more pro-risk and should be CAD-supportive, if only in the short-term,' TD said.
TD said key short-term resistance for the U.S. dollar stands at C$0.9775/85. 'We look for good support for the [U.S. dollar] on dips to the C$0.9700 area for the moment but we do not see the [Canadian dollar] giving back much of its recent rally any time soon,' it said.
The euro is trading at C$1.3581 from C$1.3482 late Wednesday, according to data provider CQG, after Trichet signaled that inflationary pressures in Europe are rising.
The ECB left its key rate unchanged at 1.00% earlier Thursday, confirming market predictions.
The Canadian unit has declined modestly against the U.S. dollar in early North American trading after trading in narrow ranges overnight. The U.S. dollar is trading at C$0.9732 from C$0.9724 late Wednesday.
'You haven't seen that much of a major move in the Canadian dollar despite the fact that we did close above $100 in [West Texas Intermediate crude] yesterday,' said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London.
Crude oil prices have receded somewhat from overnight highs after Venezuelan President Hugo Chavez proposed a multinational commission mediate the violent conflict between Libyan leader Moammar Gadhafi and rebel groups.
Gallo said the Canadian dollar is 'finely balanced' between the short-term support from strength in crude oil and the potential risks to global growth if oil prices continue to spike higher.
A gradual increase in oil prices to the $105 to $110 range that doesn't impair global growth will be positive for the Canadian dollar, but a short-term spike to the $125 area would be negative for growth and consequently the Canadian unit, he said.
TD Securities said that with no domestic data on the agenda in Canada, it will be a day of flow-driven moves for the Canadian dollar.
'Overnight trading has been fairly quiet but the broader backdrop looks a little more pro-risk and should be CAD-supportive, if only in the short-term,' TD said.
TD said key short-term resistance for the U.S. dollar stands at C$0.9775/85. 'We look for good support for the [U.S. dollar] on dips to the C$0.9700 area for the moment but we do not see the [Canadian dollar] giving back much of its recent rally any time soon,' it said.