The Canadian dollar is ripping higher today and is by-far the best performing G10 currency. The move has knocked USD/CAD 110 pips lower to 1.2633.
I strongly suspect this is a flow-driven move in a thin market — someone needed Canadian dollars ASAP. That’s especially evident with oil down 1.2% today and global equities softer.
There’s a particular dynamic unfolding this year in equity markets as well. Canada will be closed on Monday to observe the New Years holiday while US markets will be open. That could be playing into this move and also means that Monday’s liquidity in CAD will also be thinned.
In general, moves like this tend to unwind when markets return to full strength. USD/CAD is also running into some support at 1.2600.