The Canadian dollar and the rest of the commodity bloc are relative under-performers on the session so far, losing ground to the European currencies in the main.

"The commodity bloc has under-performed over the past couple of weeks even as equity markets have risen broadly (and the S&P 500 moved through 1500).  This is evidence perhaps that investors are rotating away from the blunt risk on/off trading meme to a more finessed approach to risk which might leave the high beta currencies a little more susceptible to domestic fundamentals," says Shaun Osborne at TD Securities.  

According to Osborne it may not be clear whether we are seeing a durable break in risk on/off trading unless or until we get a significant correction in the current stock rally.  

Canadian dollar could, technically see more gains against the US dollar

A quick look at the spot exchange rates shows the pound / Canadian dollar to be 0.4 pct higher on last night's close at 1.5840.

The US dollar / Canadian dollar rate is 0.25 pct higher at 1.0034 while the euro / Canadian dollar pairing is 0.58 pct down at 1.3586.

Please be aware that these are spot market rates - your bank will add their own spread to the retail rate. An independent FX provider will however seek to undercut the rate offered by your bank. Find out more here.

Despite today's price action thus far there still is the chance that the short-term technical trend in USD/CAD is turning. As Shaun Osborne says:


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"We noted yesterday that the short-term technical trend in USD/ CAD might be turning. Indeed, our short-term bear target at 1.0020 has been reached. Intraday price signals are bearish and, after yesterday’s drop in the USD, we rather think that the open gap on the short-term chart at 0.9955/65 risks getting filled. Short-term charts suggest that the USD sell off may extend on a break under 1.0015 intraday."

Could today's FOMC decision weigh on USD?

According to Camilla Sutton at Scotiabank, there is a bias for USD weakness as the FOMC decision approaches:

"Anticipation over today’s FOMC statement. The FOMC decision is not expected to contain any major new developments but with the dissenting Lacker no longer a voting member, the statement will be watched closely to see if either of the new voting hawks (George and Bullard) choose to dissent. We expect the tone to remain dovish and for that to weigh on the USD more broadly."

Australian dollar could eventually benefit

AUD, like CAD, is failing to benefit from the major shift in FX markets.

"In part as there is also an unwinding of last year’s triple A trade that saw aggressive buying of AUD, but also as the focus is currently on the majors of EUR, JPY and GBP. We expect AUD to eventually benefit from the renewed USD downside pressure," says Camilla Sutton at Scotiabank.

New Zealand dollar: Risks in the wake of RBNZ meeting

NZD is suffering today alongside its commodity peers, but one analysis suggests the currency could find some strength in the wake of today's Reserve Bank of New Zealand meeting.

A currency note from UBS says:

"The RBNZ is expected to stay put until at least the second half of the year, but our economists warn that any nuances in
the short commentary from today’s decision might confirm directionality or timing.

"Much will depend on Q4 GDP data,
and significant upside surprises away from the 0.4%q/q projection in December, according to our economists, could lead
the RBNZ to determine that 2.5% for the OCR is no longer ‘appropriate’.

"By all accounts, the market is not priced for any such move, especially after having been so many times in the past. 12-month OIS pricing is broadly flat, which suggests the risks to NZD are to the upside. However, we see several reasons to not get carried away and would rather position for a reversal."