Canadian Dollar Update, May 25, 2020 – Canadian Dollar adrift in quiet FX
USD/CAD Open: 1.3972-75, Overnight Range: 1.3970-1.4007
WTI Oil is at $33.45 and gold is at $1,726.90. US markets are mixed today.
For today, USD resistance is at 1.4006. Support is at 1.3975.
• Quiet FX markets with UK and US closed for holiday
• China/HK tensions and China/Australia trade spat fan “risk-off” fears
• Eurozone data provides a little support to EURUSD
China and Hong Kong tensions fanned risk aversion flames, as did China’s trade spat with Australia. The Chinese government is incensed with Australia’s demand for a coronavirus inquiry, and they are using their massive trade clout to express their displeasure. Recently, China slapped an 80% tariff on imports of Australian barley while rumoured to be considering tariffs on dairy, wine, and seafood. China’s actions may limit AUDUSD upside. However, the currency pair remains in an uptrend while prices are above 0.6440.
NZDUSD was underpinned after NZ Prime Minister Jacinda Ardern announced further easing of COVID-19 restrictions. It is now permissible to hold gatherings of up to 100 people.
The Canadian dollar outperformed the other commodity bloc currencies in a subdued overnight session as rising oil prices continue to support gains. Domestic economic data is not playing much of a role in providing traders with direction. Instead, Wall Street price action and general US dollar sentiment continue to drive currency moves.
Bank of Canada Governor Stephen Poloz delivers the final speech of his tenure. He retires on June 2, replaced by Tiff Macklem. The title of the speech is “Monetary Policy in Unknowable Times” and is scheduled for 1:30 pm EDT. Last week, the Governor said he thought the outlook for the economy was better than what was being reported in the press. He said “I do think that, on balance, the flow [of pessimism] that I’m hearing is a little too dire. It’s a little overblown.” He argued that analysts were too preoccupied with the drop in GDP. He said the drop occurred because the “government turned off the economy. So afterwards, when we turn the economy back on – which we’re just beginning to do – you should see a very rapid return of production.”
The Canadian dollar is also benefitting from mildly bearish USDCAD technicals.
Elsewhere, EURUSD was in demand, albeit modestly, rising from 1.0871 to 1.0907. Prices were supported by slightly better than expected German IFO data. The Institute said “sentiment among German companies has recovered somewhat after a catastrophic few months. Even though companies once again assessed their current situation as slightly worse, their expectations for the coming months improved considerably. Nevertheless, many companies are still pessimistic about their business. The gradual easing of the lockdown offers a glimmer of hope.”
FX markets will be quiet due to the US holiday, and the economic calendar is empty.
Today’s Suggested Range USD/CAD: 1.3920– 1.4020