Canadian Dollar Update, June 18, 2020 – Canadian Dollar trading sideways
USD/CAD Open: 1.3538-42, Overnight Range: 1.3521-1.3616
WTI Oil is at $38.62 and gold is at $1,730.70. US markets are mixed today.
For today, USD resistance is at 1.3628. Support is at 1.3574.
• Bank of England increases QE, as expected
• Global equities dip
• US dollar inches higher at Toronto open
The Canadian dollar is trading sideways, as US dollar is lacking in direction.
The Canadian dollar shrugged off a disappointing and worse than expected inflation report yesterday because weak economic reports are the norm for G-10 economies. For the record, Canada CPI fell 0.4% y/y in May, well below the forecast for a flat result.
FX markets were directionless overnight, ahead of policy meetings from the Swiss National Bank (SNB) and the Bank of England (BoE). The SNB left rates and policy unchanged and reiterated that their ultra-easy monetary policy would remain in place for some time. The news was expected.
The Bank of England managed to muddy the waters while delivering upon expectations. They left their benchmark interest rate unchanged at 0.1% and increased the quantitative easing program by £100 million. The surprise was that the vote to increase QE was not unanimous. The vote was 8:1 with Chief Economist Andy Haldane voting against the action. The BoE justified their actions saying “There is a risk of higher and more persistent unemployment in the United Kingdom. Even with the relaxation of some COVID-related restrictions on economic activity, a degree of precautionary behaviour by households and businesses is likely to persist. The economy, and especially the labour market, will therefore take some time to recover towards its previous path.”
EURUSD traded with a modestly negative bias and opened in Toronto just above the bottom of its 1.1226-1.1261 range. The currency pair is still suffering the adverse effects from yesterday’s weaker than expected Eurozone inflation report.
USDJPY is trading with a negative bias due to safe-have demand for yen. News of the resurgence of COVID-19 in Beijing, and increases in cases requiring hospitalization in the US, unnerved traders. A retreat in US Treasury yields and a drop in the Nikkei 225 did not help.
AUDUSD plunged to 0.6839 from 0.6884 on the back of a weaker than expected employment report, early in the Asia session. Australia announced a loss of 227,700 jobs in May and a rise in the unemployment rate to 7.1% from 7.0%. Earlier NZDUSD dipped after the government reported Q1 GDP shrank by 1.6%, compared to an increase of 0.5%. Both currency pairs fully recouped the losses in Europe.
The Canadian dollar closely tracked the antipodean currency price action. Rising oil prices limited losses while fears of another COVID-19 outbreak in the US limit gains.
FX traders will continue to follow Wall Street’s lead.
Today’s Suggested Range USD/CAD: 1.3520– 1.3620