Canadian Dollar Pulls Back in Currency Trading

The Canadian dollar is pulling back in currency trading on the FX market this morning. Forex trading with the loonie has been a bit unsettled lately, with the Canadian currency appreciating rapidly in recent weeks. However, with risk aversion growing today, the Canadian dollar is falling in currency trading.

The U.S. dollar is making gains against most other major currencies this morning. Concerns about the speed of economic recovery are sending forex traders looking for a safe haven and ignoring riskier currencies. Bloomberg reports on forex trading and the loonie:

“There’s a little bit more focus on the fact that the green shoots are just that, we haven’t seen the growth,” said Jonathan Gencher, Toronto-based director of currency sales at BMO Capital Markets, a unit of Canada’s fourth-largest bank. “Today risk is off.” Volume is light, and price movements are dominated by order flow, Gencher said.

Until it looks as though the global economy is ready to recover in earnest, risk aversion will remain, and the Canadian dollar wil have a hard time maintaining its gains in currency trading.

U.S. Dollar Moves Higher in Currency Trading

The U.S. dollar is moving higher in currency trading on the FX market today. The greenback is moving up against the sterling and the euro in forex trading as safe haven demand increases.

Indeed, the budget news coming out of the euro zone is sending the euro lower -- in spite of more positive German Ifo data. Additionally, economic data coming out of Britain is sending the sterling a little bit lower as well.

With concerns about the speed of economic recovery once again moving to the forefront for investors and forex traders, it is little surprise that the U.S. dollar is being sought in currency trading as a safe haven.

Federal Reserve to Keep Interest Rates Steady

Recently, there has been speculation that the U.S. would raise interest rates by the end of the year. While there is the expectation of higher short term interest rates in the relatively near future, they are not likely to come anytime especially soon. Indeed, there are expectations that the Federal Reserve will use caution this week when speaking of economic data and interest rates, reports Action Forex:

We expect both the Fed and the BoE to communicate messages along these lines this week. The FOMC will be armed with updated economic forecasts which, though likely to show an improvement in underlying economic conditions, may also predict that economic growth could remain weak for some time, increasing spare capacity and reducing the medium-term threat posed by inflation.

Economic growth is not likely to pick up dramatically anytime soon, and that means that there will not be any pressing need to raise interest rates. Economic recovery is expected to be relatively slow in the coming months.

Euro Weakens in Forex Trading

The euro is weakening in forex trading on the currency market right now as budget problems present issues. Even though the German Ifo is beating expectations, there is still some caution about the euro zone and its budget problems.

Indeed, concerns about an expected budget deficit in Germany is overcoming the positive Ifo data. With Germany one of the main drivers behind the euro zone economy, it is little surprise that the country is so influential when it comes the performance of the euro in forex trading. GFT's Boris Schlossberg reports on some of the issues regarding Germany and the euro zone in FX360:

The pair was under pressure from the start of trade falling through the 1.3900 handle after WSJ noted that Germany could see as much as 100 billion euro shortfall next year. Given the fact that euro balance sheet support is contingent almost solely on Germany’s finances tonight’s news was not received well by the market.

For now, it appears as though safe haven currency trading is likely to take precedence once again.