Canadian Dollar Update, May 29, 2020 – Canadian Dollar firms with April GDP on tap
USD/CAD Open: 1.3750-54, Overnight Range: 1.3714-1.3832
WTI Oil is at $33.45 and gold is at $1,751.60. US markets are mixed today.
For today, USD resistance is at 1.3865. Support is at 1.3759.
• Canada April GDP fell 8%
• Traders cautious ahead of Trump’s press conference
• Eurozone data opens door to new ECB stimulus
The Canadian dollar is poised to close out May with a 2.1% gain against the US dollar, since the beginning of the month. However, its performance lags that of its Antipodean cousins. The Australian and New Zealand dollar gained 3.3% and 2.3% respectively. The British pound was the worst-performing major G-10 currency losing 2.1%, mostly due to fears that the EU/UK trade negotiations will fail.
Canada’s April GDP data, as ugly if as ugly as expected will not have much impact on Canadian dollar trading. That is because it is all due to the COVID-19 pandemic lockdown, and the rest of the G-10 nations are suffering a similar fate.
The US dollar is suffering from month-end portfolio rebalancing. Portfolio managers, enjoying over 3% gains in the Dow Jones Industrial Average, and S&P 500 Indexes, need to sell US dollars to bring their portfolios into line with their benchmarks. Those flows helped to drive GBPUSD from 1.2292 to 1.2366 and USDCAD from 1.3792 to 1.3734, in early Toronto trading.
The month-end flows may be masking risk aversion demand for US dollars as China/US tensions continue to ratchet upwards. Trump ramped up his words after Beijing took measures to quell unrest in Hong Kong. The US State Department said HK is no longer autonomous from China, which puts HK’s special US trade status in jeopardy. President Trump said he would announce new sanctions on China, today.
Eurozone economic data was weak. German Retail Sales fell 5.3% in April, which was better than expected but it shows the toll the pandemic is exacting. Eurozone inflation rose a mere 0.1%, raising the risk of deflation which led to predictions of new ECB monetary stimulus being announced next week. EURUSD gains may lead to EURCAD demand.
GBPUSD tracked EURUSD higher with month-end portfolio rebalancing flows fueling the move. However, ongoing concerns about EU/UK trade talks may limit gains.
Today’s Michigan Consumer Sentiment Survey may give positive risk sentiment a lift if it surprises to the upside, although Trump’s press conference will overshadow
Today’s Suggested Range USD/CAD: 1.3700– 1.3800