• USD/CAD reached multi-year lows in recent trade at 1.2910
• Market is seeing a fresh wave of USD weakness, driven by vaccine and stimulus optimism
• US President Trump expected to sign the China delisting bill, giving major Chinese companies 3 years for the compliance transition
USDCAD closed out Wednesday trade with 0.13% lower, touching the 1.2910 level, a fresh multi-year low. This movement has largely been determined by the USD side, which continues the bearish trend due to market’s high expectations on the inflation, backed by the positive vaccine news and optimism on the stimulus package.
In terms of the vaccine news, Pfizer and BioNTech’s vaccines will be shipped as soon as December 15 and Moderna’s earliest shipment is marked as early as December 22. FDA will make a finalized decision on December 10 regarding the dates. Some countries, such as the U.K., will have shots available to the public as early as next week. This vaccine optimism has helped confirmed that the global economy is on the track to recover, and investors will soon be able to move some of the assets out from the U.S. to other regions of the world.
On the other hand, the stimulus talk in the U.S. has spurred a similar optimism as well. Although Senate Republicans and Democrats possess different opinions on the package details, the former preferred the package to be under $500B yet the latter wanted it around $1.3T, they both agreed that a value at $900B would be a good basis for the negotiation. This attitude has indicated a greater appetite for compromise, encouraging investors to believe that inflation is on the agenda. If the U.S. non-farm payrolls do end up below expectations this Friday, the stimulus package will likely be more powerful.
Another political news that will likely affect the FX market is that, the U.S. House of Representatives have approved a bill concerning China on Wednesday which is expected to be signed by Trump soon. The bill will force Chinese companies to delist from the U.S. stock exchanges if they fail to adhere to U.S. auditing standards. The bill gives companies such as Alibaba 3 years for the transition. In the past, US-China trade wars usually have a USD-positive theme. Meanwhile, AUD is perhaps the most vulnerable G10 currency on this US-China tie, as it heavily relies on China for the exports. At this moment, the directional impact of this political action is still unclear but it is worth to keep an eye on the update.