Morning Commentary & Currency Insights – January 19, 2018

The DXY remains depressed with odds of a U.S. government shutdown over the weekend now at 40% after last night’s Senate stalemate on temporary funding measure that would keep federal operations running through Feb. 16.  Temporary government funding runs out at midnight Friday so the market will be looking for headlines to show the impasse has been resolved which may provide a brief respite for the dollar.  If nothing occurs look for a muted session today favouring USD weakness.

USD/CAD remains rangebound after a very volatile beginning to 2018 and will likely follow general market themes as no significant data releases are scheduled for today.  I am in agreement with Goldman Sachs as they noted, “risk/reward of playing USDCAD from here doesn’t look particularly attractive given how volatile these NAFTA talks can be and (we) ultimately think USDCAD will remain in a 1.2350/1.2600 range until either NAFTA is sorted out one way or another or a major turn in the USD is able to move the needle.”