The US dollar is up for some losses today versus the Canadian currency, as sentiment turns to optimism on account of upcoming economic data and on expectations that the fiscal cliff would be averted. Just yesterday, market skepticism drove the trades, but is now being replaced with a new bout of positivity after comments from both sides expressed hope and a sense of urgency.
According to the latest Bloomberg Global Poll of investors, the world economy is in its best shape in 18 months as the US looks likely to avoid the tax increases and spending cuts come January 1. Only 6 percent of investors anticipate a political impasse that would send the world’s largest economy over the so-called fiscal cliff and into a recession.
“Our ultimate goal is to get an agreement that is fair and balanced,” President Barack Obama said in a nationally televised statement. “My hope is to get this done before Christmas. But the place where we already have, in theory at least, complete agreement right now is on middle-class taxes.” In a separate interview, Republican House Speaker John Boehner stated that he is optimistic that officials can “avert this crisis sooner rather than later,” though he continues to oppose the expiration of tax cuts for top earners and adds that Democrats need to get “serious” on budget cuts.
Treasury Secretary Timothy F. Geithner is scheduled to meet today with each of the top four leaders in Congress: House Speaker John Boehner, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell. This happens a day after President Obama won backing from more than a dozen corporate executives to raise taxes as part of a deal to avert the fiscal cliff. Several of the CEOs who met with Obama said the group could support raising taxes on high incomes including their own if it were part of a plan that also reins in spending.
Aside from the cliff negotiations, data today is forecast to show that gross domestic product in the world’s largest economy expanded faster than previously estimated. In line with the Federal Reserve’s Beige Book, the revision on third quarter GDP is expected to show a 2.8 percent improvement, more than double the second quarter third estimate on Real GDP and up from the third quarter advance estimate of 2.0 percent.
Also, Unemployment Claims from last week is estimated to show that initial claims for jobless insurance declined. From 410,000 in the previous release, the median estimate for the upcoming data is a dip to 392,000. Moreover, Pending Home Sales increased during the month of October, according to economists. An increase of 0.9 percent is projected to follow a 0.3 percent rebound in September.
Considering the optimism that these fundamentals bring to the market exchanges, the USDCAD is suggested for a short position today. With technical price corrections still likely, take caution.