Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD was the worst performing currency in what was another volatile week. After trading to 1.3464 the previous Friday, USDCAD moved dramatically lower during Monday's session towards 1.3315. Equity markets followed Friday's late surge higher with the DJIA adding 2,000 pts on central bank stimulus hopes. Oil prices also surged 12% early in the week on hopes that Friday's OPEC meeting would result in the necessary additional output cuts to stabilize markets. Markets were "buying the rumour" and "selling the fact" as more volatility ensued. After the U.S. Fed announced an emergency interest rate cut of 50 bp (the next scheduled meeting is March 18th) markets sold off again and USDCAD dropped from 1.3380 down to 1.3320 before moving back to 1.3391. The pairing dropped back to 1.3330 ahead of the Bank of Canada interest rate decision. The BOC also cut rates by 0.50% sending USDCAD up to 1.3430. Equity markets sold off heavily with the DJIA losing nearly 2,000pts while oil prices dropped 15%. Friday's OPEC meeting failed to generate the 1.5 million barrels per day production cuts the market had been anticipating. Despite good jobs data out of the U.S. and Canada, USDCAD moved from 1.3380 up to 1.3440 before closing the week @ 1.3420.
Virus-fomented turmoil continued to rattle global financial markets, with U.S. stocks plunging and Treasuries rallying as investors await details of a policy response from the Trump administration. The S&P 500 sank 3.4%, wiping out more than half of Tuesday's surge, after President Donald Trump failed to deliver on his promise for a sweeping stimulus package to combat the economic effects of the coronavirus. The 10-year Treasury yield fell below 0.7% and crude tumbled back toward $33 a barrel. Goldman Sachs slashed its forecast for the S&P 500 and said the bull market will end soon. Financial markets whipsawed this week as investors grapple with the potential economic hit from the virus that is upending daily routines around the world. Policy makers have grown increasingly ready to take action, with the ECB indicating it may move as soon as this week, the Bank of England cutting rates and German Chancellor Angela Merkel pledging to do "whatever is necessary" to bolster the economy. In the U.S., the Trump administration continues to promise "major" stimulus, but details remain uncertain. Markets are now growing worried that whatever does come will not have the ability to stave off a major blow to the world's largest economy.
Stocks jumped Tuesday, paring some losses after a stunning selloff Monday hit major indexes with their biggest one-day declines since the financial crisis. Meanwhile Yields on Treasurys tick up from record lows, oil was up over 6% and a temporary sense of calm has drifted over the markets.
Yesterday, USDCAD climbed from 1.3383 up to 1.3432 – the same level as Wednesday's post Bank of Canada rate cut move that saw USDCAD climb from 1.3330 up to 1.3430) before falling back to 1.3390. A second attempt stalled at 1.3438- just short of last Friday's 9 month high of 1.3464. Oil prices slumped 4% while the DJIA dropped 3% - erasing 800pts from Wednesday's 1,300 pt gain. The market sell-off continued overnight before briefly rebounding in the London session. USDCAD gained to 1.3413 before falling to 1.3379. The pairing then climbed to 1.3428 as global equity markets sold off again by nearly 3%. Oil prices also dropped heavily as the OPEC meeting failed to confirm additional oil output cuts. Canadian and U.S. February jobs data both beat estimates and that sent USDCAD back down to 1.3400. North American equity markets have paired earlier losses with the DJIA down just 300 pts after having been down nearly 1,000pts for the 2nd straight day. USDCAD has since moved back up to re-test session highs.
U.S. stocks tumbled, giving up more than half of Wednesday's steep gains as volatility sparked by the spread of the coronavirus woes continued to grip financial markets. Treasury yields sank to record lows as haven assets remain in demand. Sentiment took a hit after more cases of the virus popped up across the U.S., including in New York, and California declared a state of emergency. European shares slid as companies warned the epidemic would hurt results.
The Bank of Canada cut half a percentage point from its benchmark interest rate Wednesday, easing monetary policy for the first time in more than four years as it followed the Federal Reserve in trying to protect its economy from the coronavirus. The central bank lowered its overnight rate to 1.25% from 1.75% and said the spread of the coronavirus represents a "material negative shock" to the Canadian and global outlooks.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
This was one of the most volatile weeks on record that recent market gains unravel in dramatic fashion. The CAD had been the best performing currency heading into the week trading near 3 week highs against the USD, 14 month highs against the JPY, and 3 year highs against the EUR. Reports of a rise in coronavirus cases outside of China (namely in South Korea, northern Italy, and Iran) sparked widespread risk aversion flows. Global indices saw sharp losses with Canada's TSX falling 10% towards 6 month lows. The DJIA lost as much as 15% before a late 3.5% rally in the final minutes of trade Friday. Oil prices plunged nearly 20% towards 15 month lows while U.S. 10 year yields are approaching historical lows near 1%. Markets are now pricing in 3 interest rate cuts by both the U.S. Fed and Bank of Canada this year. The decline in interest rate advantage along with the steep equity market sell-off has led to a massive covering of carry trades (borrowing a low-yield currency to purchase / invest in a higher yielding currency) The JPY has soared to 5 month highs while the EUR has climbed to 7 month highs. The CAD, GBP, and AUD are subsequently the worst performing currencies on the week. USDCAD opened the week at 1.3225 before rising to 1.3308. The 1.3300 level was proving to be a tough level to crack into Wednesday's session but USDCAD finally broke the Feb 2020 and November 2019 high of 1.3328. The pairing rallied to 1.3348 before extending up to 1.3394 on Thursday. USDCAD climbed to 1.3464 during Friday's London session – the highest since June 2019. Canadian GDP came in as expected while North America equity markets staged a sharp rally in the final minutes of trade. The DJIA surged 1,000 pts to finish in positive territory. USDCAD fell towards session lows closing the week just under the 1.3400 mark. There were reports of a possible coordinated central bank intervention (in terms of lower interest rates) to help stabilize markets.
U.S. stocks surged with two-year Treasuries after the Federal Reserve announced an emergency rate cut to combat the economic effects of the coronavirus.The S&P 500 spiked to a session high and the two-year Treasury yield tumbled after the central bank shaved 50 basis points of its benchmark rate. Stocks started lower after Group of Seven finance ministers and central bankers stopped short of taking action after a 7 a.m. call. That changed after the Fed met and took a unanimous vote to to cut the rate to a range of 1% to 1.25%.
U.S. stocks headed for their first gain in 8 sessions as investors assessed prospects for central-bank intervention to mitigate the economic impact from the spreading coronavirus. The S&P 500 advanced Monday after suffering the worst week for the benchmark since 2008. Tech shares led gains as central banks from Japan to England joined the Federal Reserve in promising action as warranted. Adding to hopes, Group of Seven finance ministers plan to hold a teleconference Tuesday to discuss how to respond to the outbreak. The two-year Treasury yield sank through its 2016 lows and 10-year rates fell below 1.10%. Oil rallied on expectations that the OPEC+ alliance will deepen output cuts. Equities got a boost from a rare statement on Friday from the Federal Reserve, which opened the door to a rate cut based on the "evolving risks" posed by the outbreak. Central banks in Japan and the U.K. followed suit with supportive messages. But investors are weighing the comments against increasing pessimism from economists on global growth, with fears mounting that the virus will trigger more losses. The global death toll from the virus has surpassed 3,000. U.S. cases climbed over the weekend, with the first infections appearing in New York City, Brussels and Berlin, while cases jumped in hot spots of Italy, Iran and South Korea. Positive tests in Italy jumped by more than 500 to 1,694 on Sunday with 41 deaths. Lombardy, the region that includes the financial capital of Milan, accounted for almost 1,000 cases.
Yesterday, USDCAD climbed from 1.3316 up to 1.3394, the highest since June 2019. Overnight, the global equity market selloff continued sending the USD and JPY broadly higher and the CAD, GBP, AUD, and NZD lower. USDCAD climbed quickly from 1.3375 to 1.3448 in Asian trade before extending to 1.3464 during the London session. Canadian Q4 GDP came in as expected and USDCAD declined to 1.3425. A second rally higher stalled at 1.3460 and the pairing has since declined to 1.3410. The World Health Organization has raised global risk from corona virus to "very high". Markets are now pricing in 3 interest rate cuts by both the Bank of Canada and the U.S. Fed for this year. Equity markets have had the worst week on record with the DJIA losing 14%.
Global stocks tumbled, government debt yields sunk to unprecedented lows and crude oil extended declines as anxiety over the spread of the coronavirus surged. The six day slide pushed the S&P 500 and Dow Jones Industrial Average indexes down 10% from all-time highs set this month. Haven assets continued to be in demand.
U.S. equities gained for the first time in 5 days as investors digested fresh evidence of the widening coronavirus outbreak. All 3 main American equity gauges were positive in the wake of the more than 6% slide in the benchmark S&P 500 over the past 2 days. Ten-year Treasury yields still lingered near the record-low close set Tuesday. European shares pared losses at the start of U.S. trading, while Asian equities closed lower. Oil bounced around $50 a barrel. President Donald Trump and federal health officials plan to brief the U.S. public today on efforts to prevent the spread of the coronavirus. Diageo Plc and Danone SA warned earlier that the outbreak will hit sales in China. The first cases in Greece and in South America emerged, while Spain locked down a seaside resort hotel with about 1,000 guests and workers inside. Risk assets are struggling to rebound as coronavirus cases steadily climb outside the epicenter in China. South Korea said its national total rose to more than 1,000, while American health officials Tuesday warned that they expect the epidemic to spread in the U.S. Traders may be looking out for further signs of policy accommodation after American central bankers said they are closely monitoring the spreading virus, though it's "still too soon" to say whether it will change the outlook. Investors are still digesting the ramifications, the extent of the coronavirus -- what's this going to mean for economic growth both here and overseas.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.caThe CAD was the top performer this week on a combination of positive economic data, higher oil prices, and generally positive risk sentiment in the markets. The USD declined to a fresh February / 3 week low while the EUR fell towards a 3 year low. The JPY was the worst performing currency falling to 14 month lows as economic data out of Japan has been poor. Also, the carry trade continues to hurt the JPY as interest rates are expected to remain at 0% for the immediate future. USDCAD initially dropped to 1.3225 before climbing to 1.3278 on Tuesday on the back of weaker Canadian manufacturing data / softness in oil and equity markets. The move higher was short-lived and the pairing declined to 1.3215 on Wednesday after Canadian CPI (inflation) increased more than expected, oil prices rallied 3%, and equity markets recovered Tuesday's losses. USDCAD rallied higher on Thursday on the back of broad-based USD strength that saw the USD index rise to the highest level in 3 years. The rise stalled near the recent resistance zone (1.3265 – 1.3280) that has contained numerous USDCAD rallies since Feb 12th. The 1.3268 level was tested yet again during Friday's Asian and London sessions before an abrupt change in trend. The USD broadly weakened taking USDCAD down below recent support levels (1.3235, 1.3225, 1.3215) to a fresh 3 week low of 1.3202. Canadian retail sales were better than expected factoring in positive revisions to prior data while oil prices finished the week near a 1 month high.
U.S. equities rose and European shares remained lower as investors continue to digest the fallout of the Coronavirus developments following the worst two day market performance in 2 years that wiped out billions of dollars of wealth from the worlds markets.
The USD/CAD pair jumped to two-week tops, levels beyond the 1.3300 this morning, albeit quickly retreated few pips thereafter. Having shown some resilience below the very important 200-day SMA on Friday, the pair caught some fresh bids on the first day of a new trading week and was being supported by a combination of factors. Fears that the deadly coronavirus is spreading outside of China and might hurt global growth triggered a fresh wave of the global risk-aversion trade, which was evident from a sea of red across equities. The global flight to safety turned out to be one of the key factors that provided a strong boost to the US dollar's perceived safe-haven status and drove the pair higher through the mid-European session on Monday. Meanwhile, the outbreak concerns weighed heavily on crude oil prices, now down over 4% for the day, which undermined demand for the commodity-linked currency, the loonie, and remained supportive. However, the risk-off mood-led slump in the US Treasury bond yields seemed to keep a lid on any strong follow-through USD buying and might eventually cap gains for the major, at least for the time being.
U.S. equities fluctuated as investors mulled how the coronavirus's spread beyond China will affect corporate earnings. The dollar jumped and gold traded at 7 year highs as investors sought havens.The S&P 500 Index was little changed after Japan reported two deaths and South Korea confirmed its first fatality from the disease, even as China reported a slowdown in new cases.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD was mixed this week as markets continued to shrug off global growth fears from the coronavirus induced economic slow-down in China. The CAD actually weakened during Monday's session with USDCAD breaking the previous week's high of 1.3321 (also the December 2019 high) but stalling at 1.3328 – which also happened to be the November 2019 high as well. Oil prices dipped below the $50 level again towards 13- month lows but the trend reversed over the balance of the week with subsequent 6% climb towards a 2-week high. USDCAD moved lower as well towards the February low @ 1.3235. Subsequent rallies higher on Thursday and Friday both stalled near the broken support level since turned resistance @ 1.3270. The CAD also enjoyed gains against the EUR which broke below key support near 1.4420/50 and declined to 1.4343 – near a 3-year low. The GBP was the best performing currency this week on the overall positive risk sentiment and a change to the PM's economics team seen as fiscally stimulative / positive for the UK economy. The JPY broadly weakened as risk aversion flows continued to reverse from the safe-haven currencies (USD, JPY, and CHF) into the growth currencies (CAD, AUD, and NZD).
Equities advanced on signs that China may be planning further measures to support its economy as it reels from a virus-induced slowdown and after U.S. data pointed to solid growth. Chipmakers led the S&P 500 Index's gains after Bloomberg News reported that China's latest moves to aid growth include possible bail-outs for hard-hit industries. The dollar climbed to a four-month high after data on housing starts and building permits exceeded analysts' estimates. Treasuries held steady. The Stoxx Europe 600 Index headed toward a record close, and shares climbed in Tokyo, Hong Kong and Sydney. The yen fell to a nine-month low on concern Japan's economy may slip into a recession. Oil rose as U.S. sanctions on Russia's largest producer and conflict in Libya put the focus on supply threats. Investors appear relatively confident in the ability of policy makers to contain fallout from the deadly coronavirus, even after Apple Inc. spooked markets earlier this week by warning of a slowdown in sales. Data released Wednesday showed the housing market remains a bright spot for the U.S. economy amid sluggish business investment. Elsewhere, gold traded near its highest level since 2013, while palladium extended its record-breaking rally on forecasts for a widening deficit.
Stocks took a pause from record levels as the market is still coming to grips with the true effect of the Coronovirus on World economies. Meanwhile Canadian manufacturing sales unexpectedly sank in December, a disappointing end to an already weak year for the sector.Factory shipments were down 0.7% from November, the fourth straight monthly decline for the indicator, driven by a sharp drop in motor vehicle sales, Statistics Canada reported Tuesday in Ottawa. Economists had predicted sales would rebound by 0.7%.