Heading towards the culmination of a volatile trading week riddled with meetings by Euro Zone officials and finance ministers from across the more developed economies of the world, as well as earnings reports from the US, some gains are projected to be made by the Canadian dollar over its safety asset counterpart. Price activity for the USD/CAD is currently on a slightly bearish mood amid some consolidation between the 0.9788 and 0.9774 psychological handles. Meetings by finance chiefs from around the world, aside from a consumer sentiment report today are believed to drive price action for the North American dollar pair.
In a meeting in Tokyo yesterday, Canadian Finance Minister Jim Flaherty stated that some Group of Seven nations raised the possibility of extra fiscal measures if the global recovery weakens. Mr. Flaherty also said it is worth considering proposals by IMF Managing Director Christine Lagarde to give Greece and other troubled European countries more time to meet fiscal targets. In fact, in an article by Jim Brundsen of Bloomberg, the European Union is reported to likely consider a push back in the implementation of the phasing in of tougher Basel bank-capital rules by as much as a year after warnings that pressing ahead with the original timetable may drive up costs.
Adding to some uptick in risk confidence in the markets, German Finance Minister Wolfgang Schaeuble said that finance chiefs from around the world have acknowledged that Europe has made “significant progress” in overcoming the crisis of confidence in the Euro, adding that “this time there is a much more positive underlying sentiment.” European countries are standing by their commitments to reduce fiscal deficits, according to Mr. Schaeuble, citing a 50 percent reduction in the Euro region’s fiscal shortfall since 2009, to 3.2 percent of the area’s gross domestic product.
Across the Atlantic, signs that the US economy is stabilizing are curbing the demand for safer assets. A report from the labor department yesterday showed that initial applications for unemployment benefits fell to its lowest level since February 2008. Today, after a widely optimistic Consumer Sentiment report from the University of Michigan for September, the preliminary figure for October is forecast to post just a few points beneath the four-and-a-half-year high. Economists estimate some downtick from the revised 78.3 figure to a 78.1 statistic for the month. This would still mark the second highest since February 2008, which brings good prospects for risk takers.
Considering the effect of these fundamental data on the currency exchanges today, traders are likely to turn to the Loonie. As such, a short position is advised for the USD/CAD. The likelihood of technical price corrections is still possible though.
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