USD/CAD capped below session highs despite dovish Wilkins

• USD/CAD rallied into Wilkins speech but was capped below session highs. 
• US dollar is mixed as investors weigh the risks of the coronavirus spread vs the vaccine news.  

USD/CAD is currently trading at 1.3140 having travelled on the bid from a low of 1.3051 to a high of 1.3149 and is trading up to some 0.58% of gains at the time of writing. 

Market's broader focus remains on COVID cases alongside vaccine news. The continuing rise in Covid cases weighs on risk sentiment.  

Pfizer Inc.’s Covid-19 vaccine, while on track to be authorized as early as next month, there are still many logistical challenges in getting enough people vaccinated.

The US covid outbreak is uncontrolled throughout all states and we have started to see a rotation from economic growth stocks back into the stay-at-home choices again.

Today, the S&P 500 is down over 1% which brings in the 6th Nov lows to focus:

As such, the higher beta currencies, such as CAD are under pressure.

Senior Deputy Governor Wilkins speech

USD/CAD run up some extra ground in recent trade, targeting the session highs as we headed into a speech from Senior Deputy Governor Wilkins who is discussing the post-COVID landscape for the Canadian economy and monetary policy.

This will likely be her final speech as a member of Governing Council following the announcement that she will leave the Bank on December 9th (before her term expires in May).

Press release

The key comment there was that the recovery will need support for a while and the pandemic remains a formidable risk. 

''We are reviewing that inflation-control agreement now to make sure we’re doing the best job possible,'' she said.

''Businesses are investing less because of the pandemic, and that puts a lid on how much potential the economy has to grow,'' she explained.

''The pandemic will also lead to big shifts in the economy, and some kinds of jobs may disappear completely. This can cause “scarring”—that’s when people are out of the workforce for a long time because they can’t find a suitable job or don’t have the right skills.''

Her speech will be followed by an audience Q&A but there will not be an official press conference with the media.  

Focus is on the US dollar

Meanwhile, for the US dollar, which is currently struggling at a key resistance confluence area, analysts at TD Securities are expecting some mileage still yet to come.

''We think it is interesting that the post-election spate of USD selling has run out of steam in places. The picture remains somewhat uneven so far, however. With the near-term positioning and valuation factors turning more USD-supportive, we think the greenback could see a further rebound across much of the G10 complex — at least for now,'' analysts at TD Securities argued. 

DXY daily chart

Oil prices capped post the covid vaccine surge

Lastly, the price of oil, for which the CAD is correlated to, the IEA has poured cold water on the bid in its forecasts that have reduced demand expectations for this quarter and the first quarter of 2021.

The agency warned that the demand recovery will take time, while any return of OPEC+ production would keep inventories elevated.     

WTI, at the time of writing, is up some 0.9% on the day but well below the prior day's highs in the $43 area, trading down in the $41 area.