Forex volatility is on tap this week in the run-up to OPEC's attempt to agree on cartel-wide production cuts. If OPEC's 14-member cartel reach an accord, the Canadian Dollar could go on a run and, according to the Royal Bank of Canada's currency strategist Elsa Lignos, become a flight-to-safety destination for pound sterling investors. If OPEC can agree to pump less, those bets likely are off.
The pound sterling opened at 1.2418 against the U.S. Dollar for December contracts, reaching a high of 1.2495 by midday and a low of 1.2422 on the CME Globex. The Canadian dollar opened 0.74625 against the Yankee Buck, down 0.0025 for December contracts, hitting a high of 0.74635 and a low of 0.74190.
In recent weeks, attention has been drawn to the USD/EUR pair as the Euro fights to avoid parity with the surging Greenback.
Most observers believe an OPEC deal is anything but done. "Oil-producing nations have pledged to cut production but investors have very little confidence that a substantial deal will be reached by a cartel that is known to backpedal on its promises," said Kathy Lien managing director of forex strategy at BK Asset Management.
Critics contend that OPEC can't effectively enforce production benchmarks and tensions between Saudi Arabia and Iran could kill the deal.
RBC's Lignos called last week's autumn statement "disappointing" for the pound sterling. Negligible new fiscal easing and a spike in borrowing point to lower growth projections, she said. The autumn statement is a pre-budget report by Her Majesty's Treasury to Parliament.