Yesterday, USDCAD initially dropped from 1.3765 down to 1.3735, just shy of Wednesday's 10 week low of 1.3728 before climbing to 1.3789. The pairing then held a 1.3747 – 89 range for the balance of the session. Overnight, USDCAD climbed to 1.3794 before falling this morning to a fresh multi-week low @ 1.3715. The move was short-lived as softer equity markets, oil prices, and broad USD strength over the past 2 hours has taken USDCAD back up towards Tuesday's broken support zone @ 1.3830. The market appears to be taking profit into month-end as the CAD has rallied about 4 cents this month vs the USD. Also, Trump is holding a press conference later today and is expected to announce retaliatory measures against China. Yesterday, China passed a security bill on Hong Kong, threatening its long-standing independence.
Stock were mixed Thursday morning amid a deluge of new economic data, much of which was still consistent with a contraction but at least signaled some stabilization after an initial slump in activity.
A new report this morning showed new unemployment claims totaled a slightly greater than expected 2.123 million last week, though continuing claims for the prior week pulled back from a record high and fell for the first time during the pandemic. Meanwhile, first-quarter gross domestic product (GDP) was downwardly revised to show a 5.0% annualized decline, from the 4.8% previously reported.
The USD/CAD pair fell to its lowest level in more than two months at 1.3725 on Wednesday and staged a decisive recovery in the second half of the day. The selling pressure surrounding crude oil prices on Wednesday seems to be weighing on the commodity-sensitive loonie. Despite easing energy demand concerns, heightened US-China tensions cause crude oil to push lower. Meanwhile, Bank of Canada Governor Stephen Poloz said if the fiscal policy is not utilized, extreme conditions that warrant negative interest rates could be experienced. On the other hand, the souring market sentiment, as reflected by falling US Treasury bond yields and uninspiring performance of US stocks, help USD find demand as a safe-haven. The US Dollar Index, which slumped to its lowest level in more than three weeks at 98.72 earlier in the day, reversed its direction and was last seen gaining 0.18% on the day at 99.20. There won't be any macroeconomic data releases in the remainder of the session and investors will be keeping a close eye on the Federal Reserve's Beige Book.
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Oil rose above $34 a barrel in New York on signs that demand for physical crude continues to recover.
Nigeria, whose millions of barrels of unsold crude were the epitome of the oil market's glut in recent weeks, lifted the selling price for its supplies in June from record lows. Algeria also hiked its official prices by almost $3 a barrel. The moves by the two OPEC nations show increasing confidence that they can sell their barrels at costlier levels, providing them some respite after being hammered by the coronavirus outbreak.
Oil has surged more than 80% this month as demand has picked up and output cuts have started to chip away at a massive oversupply. That has also led to a steady flattening in the futures curve -- a signal market supplies are growing tighter. Russia, a key member of the OPEC+ alliance that has pledged record output cuts, expects the market to balance in June or July. The CAD dollar is a big winner today up 1%
Financial markets in the US will be closed in observance of Memorial Day on Monday and the pair is likely to stay quiet. Similar to other major currency pairs, USD/CAD is moving sideways in a tight channel on Monday amid thin trading conditions. Last week, rising crude oil prices helped the commodity-sensitive loonie outperform its major rivals. The barrel of West Texas Intermediate (WTI) gained more than 12% on a weekly basis to close around mid-$33s. Although the WTI edged lower during the Asian session on Monday, it recovered the majority of its losses and seems to be staying in a consolidation phase above $33.
Yesterday, USDCAD initially dropped from 1.3946 down to 1.3891 before climbing to 1.3971. The pairing held a 1.3930 – 60 range for the balance of the session. Risk aversion was elevated overnight as China reported it would pass a highly controversial national security law in Hong Kong – effectively reducing the autonomy in place since 1997. The Hang Seng index plunged nearly 6% towards a 2 month low. Oil prices also dropped over 6% taking WTI crude from a 3 month high towards a 1 week low. The USD and JPY were broadly bid approaching 1 week highs against most major currencies. USDCAD broke back above the 1.3970 resistance level which was broken on Monday when the pair dropped from 1.4117 down to 1.3930. USDCAD has traded to 1.4049 with pull-backs limited to 1.4020 thus far. Although North American equity markets have pared a large portion of overnight losses, the USD and JPY continue to hold their gains. Canada had the largest monthly drop in retail sales on record for March and April data is expected to be even worse.
U.S. stocks initially opened mostly lower but has clawed back to positive as investors shifted through weekly unemployment claims amid increased trade tension between America and China. Crude oil gained for a sixth consecutive session.
All three main U.S. equity gauges pared started in the red after a report showed another 2.44 million Americans claiming jobless benefits. Markets were already on the back foot after the Senate overwhelmingly passed a bill that could bar some Chinese companies from listing on U.S. exchanges. President Donald Trump stoked tensions by tweeting criticism of Xi Jinping's leadership, days before the biggest Chinese political gathering of the year.
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%.