canadian-dollar-coins - CAD
  • The safe haven USD and JPY moved southwards in the  Asian session on  fiscal stimulus optimism.
  • The Canadian Dollar underpinned as BoC moves away from  negative rates.
  • USD/CAD targets monthly lows after tanking through support.
  • CAD/JPY could advance further  as price creates a bullish Ascending Triangle pattern.

Risk on dominated in the Asian session on fiscal stimulus hopes as House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continued negotiations.

The safe haven US Dollar and Japanese Yen extended losses versus major peers. The risk-sensitive Australian Dollar rallied toa monthly high.

Gold rallied above $1,910/oz Silver surged 1.8%. US 10-year Treasury yields slipped lower.

Canadian employment figures for September are in focus.

BoC Keeps Negative Rates As A Possibility

Canadian Dollar could outperform peers in the short term despite Bank of Canada Governor Tiff Macklem’s saying that  negative interest rate policy is a tool in the central bank’s toolkit.

“Never say never” . This could be the central bank’s way of soothing the market into knowing more can be done should the economy slow considerably.

The Governor added that “as much as a bold policy response was needed, it will inevitably make the economy and financial system more vulnerable to economic shocks down the road”, furthermore “the bottom line is that the private and public sectors together need to be acutely aware of financial system risks and vulnerabilities as the economy recovers”.

This may suggest that policymakers are increasingly aware of the potential impact of alternative monetary policy measures .IT could take a marked deterioration in macro data for the BoC to ease further.

Disappointing employment data for  September could force  the BoC to reconsider its  wait-and-see positioning to monetary policy, especially as high frequency data points to a distinct slowdown in all three mobility metrics – walking, driving and transit. A resurgence of covid could derail the economic recovery..

Canada recorded its highest number of new coronavirus infections since the pandemic began, on October 8.

Meanwhile the Canadian Dollar looks set to advance versus the Japanese Yen and US Dollar if upcoming economic data urges the BoC to keep its monetary policy levers steady.