The commodity currencies diverged significantly today with the Australian and New Zealand dollars rising while the Canadian dollar edged lower.
New Zealand was the only country to report any economic data and the worse than expected trade balance figures did little to explain the latest move. In fact, the NZDUSD did not rally until the last 2 hours of the US trading session when the Dow edged back into positive territory. This move is completely driven by a recovery in risk appetite because both gold and oil prices are lower. As for USD/CAD, it has broken out to the upside and looks poised for further gains. This dovetails well into our belief that Canadian employment was particularly weak in December; the data is due for release on Friday.