The Canadian dollar weakened sharply against its US counterpart as the New York trading session go underway, due to a looming Greek default prompting investors to move away from risk such as commodity linked currencies like the loonie.
USDCAD opened the US session at 0.9807 and soared to 0.9895 by 13:30 GMT as the IMF-EU warned Greece that it must shrink its public sector and improve tax collection in order to be eligible to receive its next aid trance in October worth 8 billion euros or else run out of money and face default.
Adding to gloom was the cancelation of Greek prime minister’s U.S. trip to chair an emergency cabinet in Athens and also German Chancellor Angela Merkel’s defeat in regional elections.
EU finance ministers failed to make progress on how to tackle the euro zone debt crisis at their weekend meeting so the focus is now shifting to a conference call between Greece and its international lenders at 1600 GMT to see how Greece plans to make up its budget shortfall and avoid a disorderly default.
Crude oil plunged after New York opened, falling from USD 87.13 down to 85.55. Oil is Canada’s main export and so the Canadian currency suffers when oil prices drop.
Investors will also be closely watching Wednesday’s interest rate policy announcement from the U.S. Federal Reserve. Some expect the Fed to introduce new measures to help boost the economy, which is seeing a slowdown in growth. But, many analysts think the Fed will fall short of announcing another monetary stimulus program given inflation levels remain relatively elevated.
On the Canadian economic calendar this week, investors can expect to see data on leading indicators, wholesale trade, the consumer price index and retail trade figures.