Canadian Dollar Market Update – March 02, 2020
FX Morning Update March 2, 2020
USD/CAD Open: 1.3390-1.3433 Overnight Range: 1.3314-1.3439
Oil is at $45.57, and gold is at $1,601.50. US markets are lower today.
The short-term USD/CAD technicals are neutral. For today, USD resistance is at 1.3404. Support is at 1.3310.
March 2, 2020
The Canadian dollar stepped back from the abyss seen on Friday. USDCAD climbed steadily peaking at 1.3455 as COVID-19 pandemic fears gripped financial markets. The Dow Jones Industrial Average was threatening to close with another 1,000 point loss, and oil prices were in free-fall. Then Fed Chair Jerome Powell rode to the rescue. At 2:30 pm, he released a statement. It said: The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.” A sigh of relief echoed across Wall Street, and the DJIA recouped 2/3’s of its losses for the day. The US dollar retreated following the statement, and USDCAD closed at 1.3396.
Despite Mr Powell’s comments, FX markets were extremely nervous when they opened in Asia.
Traders were spooked by news of a surge in COVID-19 cases in Italy, Spain, South Korea, and Iran. Also, Turkey/Syria hostilities and a missile test by North Korea didn’t help risk sentiment.
The Organization for Economic Cooperation and Development (OECD) slashed their G-20 growth forecasts from 2.9% to 2.4% because of the coronavirus, warning that if it became a pandemic, growth would slow to 1.5% in 2020.
The US dollar opened in Toronto today, with losses against all the G-10 major currencies except for the British pound, due to rising expectations of coordinated G-7 interest rate cuts. French Finance Minister Bruno LeMaire, got the ball rolling when he told a TV network; “There will be a concerted action. Yesterday I spoke with the G7 president, the U.S. Treasury Secretary Steven Mnuchin, and this week we will have a meeting by phone of the finance G7 ministers to coordinate our responses.”
EURUSD rallied to 1.1120 from 1.1038 with better-than-expected German, and Eurozone Manufacturing PMI reports underpinning the gains. However, the main Euro-area equity indexes are deep in the red as are US equity futures,
GBPUSD is in another world again. It didn’t participate in the broad US dollar sell-off, and it is trading just above its overnight low of 1.2735 in Toronto. Traders are more concerned about the onset of the European Union and UK trade talks, which are expected to be acrimonious. There is an elevated risk that Britain does not secure an agreement by the end of the year.
The Canadian dollar is continuing to rally in early Toronto trading, with prices closely tracking EURUSD moves. A Bank of Canada rate cut on Wednesday is discounted on expectations for a near-term rate cut by the Fed.
Today’s US ISM Manufacturing report may take a back seat to Wall Street price action, and coordinated interest rate cut rumours.
Today’s Suggested Range USD/CAD: 1.3333 – 1.3533.
Sincerely,
Rahim Madhavji | Knightsbridge Foreign Exchange | Toll-Free: 1-877-355-5239
www.knightsbridgefx.com
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