The Canadian Dollar gained against the U.S. Dollar ahead of the Greek parliament vote on Wednesday night on tough austerity measures. There appears to be optimism in the markets that a solution will be reached to tackle Greece’s debt problem. One solution was brought forward yesterday by France. French President Nicolas Sarkozy announced that France has drafted a solution that involves rolling over Greek bonds that are maturing and swapping them with new bonds.
This news helped calm jittery investors helping lift the Euro as well as commodity prices. Crude oil prices have been rising all day from a European session low of $90.43 to a high of $92.17 hit around 12:30 GMT. This boosted the loonie against the greenback, with USDCAD falling over 50 pips to 0.9832 from 0.9883 at time of writing (14:45 GMT).
The Canadian Dollar is a major exporter of crude oil and is a commodity-linked currency meaning that movement in oil prices greatly affect the currency.
However, gains maybe capped as investors monitor global economic recovery, especially in Canada’s major trading partner, which is the United States, and will also monitor the situation in Europe, particularly the Greek debt issue.
“The overall theme is, it’s not specifically the Canadian dollar. Obviously it’s global concerns,” said John Curran, senior vice president at CanadianForex, a commercial foreign exchange dealing firm.
“Even if we do get something positive out of Greece, it’s going to be short lived. In the back of people’s minds, there’s a lot of caution in these markets.”
Meanwhile, Canadian inflation data is expected tomorrow, and investors will focus on the CPI figures which will be a good signal for a chance of a rate hike soon. So far the forecast is for CPI to fall from 0.3% to 0.2%.