Canadian Dollar Update, May 13, 2020 – Canadian Dollar recouping yesterday’s losses
USD/CAD Open: 1.4031-35, Overnight Range: 1.4006-1.4092
WTI Oil is at $25.58 and gold is at $1,722.40. US markets are lower today.
For today, USD resistance is at 1.4122. Support is at 1.3995.
• Canadian dollar climbs on improved risk tone
• President Trump wants negative interest rates
• Fed Chair Powell on deck at 9:00 am EDT
The Canadian dollar is yo-yoing. It sank steadily yesterday and is well on its way to fully reversing that move this morning. Norway’s $1.0 trillion investment fund has been banned from investing in four Canadian oil companies, Canadian Natural Resources, Cenovus, Suncor and Imperial Oil because of higher greenhouse gas emissions.
President Trump stirred the pot yesterday, resulting in a nasty sell-off on Wall Street, which carried over into Asia markets. Trump tweeted “As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the “GIFT”. Big numbers!”
Policymakers on the Federal Open Market Committee (FOMC) turned a deaf ear. Chicago Federal Reserve President Charles Evans said he thought rates would stay near zero for quite some time but didn’t expect to resort to negative rates. St Louis Fed President James Bullard seemed to agree. He said negative rates would be problematic.
Traders are expecting Fed Chair Jerome Powell to chime in on the debate when he speaks at the Peterson Institute for International Economics, this morning.
Wall Street slid heavily in the closing hours of yesterday’s session with the Dow Jones Industrial Average (DJIA) losing 1.89%. The major Asia indices followed Wall Street’s lead, as did European bourses, so far today. However, S&P futures are in positive territory ahead of the Powell’s speech.
The Reserve Bank of New Zealand caught traders off-guard when they opened the door to the possibility of negative interest rates. The RBNZ nearly doubled its bond purchase program, increasing purchases to $60 billion from $33 billion, but left interest rates unchanged. They said, “The global economic disruption caused by the COVID-19 pandemic is expected to persist and lead to lower economic growth, employment, and inflation both in New Zealand and abroad.” That wasn’t all surprising but the comment that “We expect to see retail interest rates decline further…” spooked traders. NZDUSD plunged from 0.6090 to 0.6000 after the statement. Prices have recouped over half of those losses in early Toronto trading.
Today’s US Producer Price Index was weaker than expected, dropping 1.3% m/m in April compared to forecasts for a -0.5% decline.
Today’s Suggested Range USD/CAD: 1.3990– 1.4090