Canadian Dollar Update, June 2, 2020 – Canadian Dollar rally gathers steam
USD/CAD Open: 1.3502-06, Overnight Range: 1.3485-1.3585
WTI Oil is at $36.15 and gold is at $1,753.70. US markets are mixed today.
For today, USD resistance is at 1.3560. Support is at 1.3491.
• Economy reopening euphoria fueling risk sentiment
• Global stock indexes climb-Wall Street poised to open with gains
• OPEC/Russia rumoured to agree to extend production cuts to Sept. 1
The Canadian dollar rallied again overnight, alongside the rest of the G-10 major currencies. Only JPY and CHF skipped the party.
The Canadian dollar rally does not have anything to do with domestic influences. It is all due to broad US dollar sentiment, and that sentiment is bearish. Traders are euphoric about the easing of COVID-19 lockdown restrictions around the world, particularly in the USA. Judging by the scope of equity market gains, and US dollar losses, traders, appear convinced that global economies will rebound.
Traditional concerns about ballooning government deficits, the risk of rising inflation due to pent-up demand for products and services, and new, escalating trade tensions between the US and China are being ignored.
Even the Reserve Bank of Australia is optimistic, albeit cautiously. At its meeting today, the RBA left interest rates and policy unchanged, while issuing a somewhat upbeat outlook. They said “it is possible that the depth of the downturn will be less than earlier expected. The rate of new infections has declined significantly, and some restrictions have been eased earlier than was previously thought likely.”
The AUDUSD rallied on the news, rising from 0.6776 to 0.6868, with the rally fueled by broad US dollar selling and higher commodity prices. NZDUSD followed suit, rising from 0.6265 to 0.6325.
USDJPY climbed to 108.11 in early Toronto trading, extending its overnight gains, in part due to fears that the current unrest in America will delay the US recovery.
EURUSD continues to grind higher and is trading close to the top of its overnight 1.1116-1.1187 range, in Toronto. The rally continues to be powered by optimism about the EU proposal for an €825 billion COVID-19 relief fund. It got an added boost today when the German government announced a new €80 billion stimulus plan.
GBPUSD followed EURUSD higher, rising from 1.2480 to 1.2575. Part of the gains were due to hopes of a breakthrough in the EU/UK trade talks this week.
A jump in crude oil prices bolstered the Canadian dollar. OPEC and Russia are reportedly nearing an agreement on extending production cuts to September 1.
The Canadian economic calendar is empty today. US data is second tier, leaving stock markets to provide FX direction.
Today’s Suggested Range USD/CAD: 1.3450– 1.3550