[ForexNews]

We saw a very subdued overnight session, with USD/CAD holding in a tight 50 point range. Risk currencies haven’t done as well as we may have expected given the largely better news overnight, the small gains in equity markets, and the rebound overnight in energy prices. Not to mention this morning’s Canadian bank earnings, which were largely on the strong side, perhaps reminding markets of Canada’s ranking as having the strongest banks in the world. It seems that markets are hesitant to do much ahead of this morning’s ECB meeting, and tomorrow’s dual Canada-US employment reports. Tomorrow morning markets are expecting to see a 15K gain in Canadian employment for November, with the unemployment rate steady at 8.6%. Any positive jobs number should be supportive of CAD tomorrow morning, helping to highlight the contrast between the stabilizing labour market in Canada and the labour market disaster in the US. But until then we probably won’t see much movement in USD/CAD, which should continue to drift around in a 1.0425/1.0550 range, driven largely by overall risk sentiment.

There has been a lot of good news out over the last 24 hours: Bank of America is repaying its TARP money; the Nikkei 225 was up nearly 4% overnight, its largest daily gain since May, and its fourth day in a row in positive territory; and gold has made fresh highs overnight, up to $1226. But currency markets haven’t done a whole lot in return, likely waiting for this morning’s ECB announcement and tomorrow’s nonfarm payrolls report before making any big moves. SEK was the biggest mover overnight, still reacting positively to the Latvian budget earlier this week, and JPY continues to weaken, which was one of the reasons attributed to the gains in the Nikkei. But risk currencies were relatively stable, with AUD and NZD posting only small gains since yesterday’s close.

This morning the ECB already made its latest interest rate announcement, where as expected, the rate was left on hold.

Although the NZD hasn’t done all that much over the last few days, it’s worth pointing out the significant rise in commodity prices there. The ANZ released its (trade-weighted) commodity price index for November last night, where we saw a massive 10.5% M/M gain, the largest in 23 years. New Zealand commodity prices are not all that far from where they were in the summer of 2008 when energy prices were peaking (they’ve regained about 80% of their decline), and they’re doing especially well when compared with Australia and Canada. This boost in commodity and export prices should be supportive for NZD in the medium term.