Canadian Dollar Update, April 15, 2020 – Canadian Dollar drowning in oil
USD/CAD Open: 1.4016-20, Overnight Range: 1.3876-1.4120
WTI Oil is at $20.00 and gold is at $1,748.20. US markets are lower today.
For today, USD resistance is at 1.4206. Support is at 1.3993.
• International Energy Agency (IEA) forecasts 9.3 million bpd drop in global crude demand
• IMF World Economic Outlook warns of negative 3.0% global growth for 2020
• Global risk sentiment turns negative
• US dollar in demand, opened in Toronto with gains across the board
The Canadian dollar is sinking in a sea of crude. West Texas Intermediate (WTI) oil prices entirely erased all its gains from the run-up in prices ahead of the OPEC and non-OPEC meeting last week.
The cartel and friends agreed to an unprecedented 10.0 million barrel per day production cut that would take effect on May 1. However, over-production was only part of the problem behind the drop in oil prices in 2020. The draconian measures enacted by 187 countries, essentially locked a huge part of the world’s population in their homes. Business closures and travel restrictions crushed demand for crude products, at the same time as Saudi Arabia and Russia ramped up production. The resulting massive oversupply and the ongoing coronavirus restrictions around the world will continue to depress crude demand for the next few months. Yesterday’s API report showing US crude inventories rose by 13 million barrels in the week ending April 9, underscored the supply imbalance.
The IEA hopes that falling production from Canada and the US combined with increased crude purchases by China, South Korea, India, and the US to top up strategic reserves, and the announced production cuts, will turn the oil surplus into a deficit in the second half of the year.
The International Monetary Fund (IMF) released its quarterly World Economic Outlook (WEO) yesterday. The IMF slashed its 2020 global growth forecast by 6.3%. In January they expected growth of 3.3%. They now expect negative 3.0%, and that is their best-case outlook, which assumes “that the pandemic and required containment peaks in the second quarter in most countries in the world, and then recede in the second half of this year.” They went on to say that the global lockdowns make this the worst recession since the Great Depression.
Wall Street ignored the WEO news, but Asian markets were not as forgiving. They quickly shifted into risk aversion mode and bought US dollars.
The antipodean currencies were slammed, led by a 1.58% drop in the Australian dollar and a 1.43% decline in NZDUSD.
The Canadian dollar followed the antipodean currencies lower and extended the losses in early Toronto trading today. The currency is on the defensive due to low oil prices and because of caution ahead of today’s Bank of Canada policy meeting and the tone of Governor Poloz’s press conference. The BoC is likely to leave monetary policy unchanged.
Today’s Suggested Range USD/CAD: 1.4000 – 1.4100