The USD/CAD pair rallied to the upside on Thursday, where the U.S. dollar strengthened despite the ECB’s announcement of more monetary easing, as the European Central Bank cut the benchmark interest rates by 25 basis points to 1.00% in line with forecasts and announced more nonstandard measures to ease tensions surrounding the European debt crisis. Nonetheless, the ECB stopped short from signaling quantitative easing, which weighed down on confidence ahead of the EU summit on Friday.
Moreover, Canada released the housing starts for November, where housing starts fell to 181.1 thousand, worse than median estimates of 200.0 thousand, which weighed down on the Canadian dollar, while the better than expected jobless claims failed to restore confidence, as the focus remained on today’s ECB rate cut and the EU summit on Friday.
Pessimism started to spread through markets ahead of the EU summit, where investors are starting to doubt the ability of EU leaders to come up with a resolution to the debt crisis. Accordingly, investors targeted lower yielding assets including the U.S. dollar, which put the Canadian dollar under pressure and pushed the USD/CAD pair to the upside.
Traders will continue to monitor the developments from Europe regarding the debt crisis, where the focus will turn to the EU summit on Friday, and whether EU leaders will be able to craft a solution to the debt crisis in Europe.
The USD/CAD pair could extend its gains on Friday, since speculations continue to mount that EU leaders will fail to agree on measures to ease the debt crisis in Europe, but we still expect volatility to continue to dominate trading, as uncertainty remains the dominant theme in markets, and that could also lead to high levels of fluctuations for the USD/CAD pair.
Friday December 9:
Canada will release the international merchandise trade for October, where the trade surplus is expected to narrow to 0.60 billion Canadian dollars, from 1.25 billion CAD.
The United States will join the session at 13:30 GMT with the Trade Balance figures for October, which could have narrowed slightly to $13.0 billion from $13.1 billion.
At 14:55 GMT theUnited Stateswill end the week with theUniversityofMichigan Confidencefigure for December in a preliminary reading, where the confidence is expected higher at 65.5 compared with the prior of 64.1.
**European Leaders Summit**
Originally posted here
