Canadian Dollar Update, October 15, 2020 – Canadian Dollar drops on risk aversion
USD/CAD Open: 1.3194-98, Overnight Range: 1.3137-1.3259
WTI Oil is at $40.28 and gold is at $1,909.10. US markets are lower today.
For today, USD resistance is at 1.3263. Support is at 1.3224.
• Second-wave coronavirus outbreak in Europe and UK lifts US dollar
• Brexit brinkmanship sinks GBPUSD
• Risk aversion sentiment ripples across FX markets
The US dollar rallied across the board overnight. A wave of risk-aversion sentiment washed over equity and FX markets fueling US dollar demand. The Canadian dollar was collateral damage.
Asia equity markets came under pressure after Wall Street closed with losses. Poor earnings reports from Wells Fargo, and Bank of America, weighed on Asia stocks. Also, increased tensions between China and the US had a lot of influence. The US State Department warned that companies doing business with sanctioned Hong Kong officials could also face sanctions from the US government. In addition, a US Navy destroyer cruised the Taiwan Strait, antagonizing Beijing. Those issues drove HK’s Hang Seng Index down 2.06%.
Australia had its problems. Reserve Bank of Australia Governor Philip Lowe warned that interest rates could go lower, and bond purchases could increase if slow economic growth warranted another round of monetary stimulus measures. Traders interpreted his words to mean if it was not a matter of “if” but “when.”
AUDUSD dropped sharply, falling from 0.7167 to 0.7068. A weak employment report contributed to the losses, making AUDUSD the worst-performing major G-10 currency overnight. NZDUSD dropped due to widespread US dollar demand.
USDJPY traded sideways in a 105.00-105.50 range. Safe-haven demand for yen combined with softer US Treasury yields undermined the currency pair, while US dollar gains acted as a brake on losses.
EURUSD dropped from 1.1757 to 1.1704. A wave of coronavirus outbreaks in many Eurozone regions is resulting in renewed restrictions. Paris is under a curfew, Spain has closed restaurants and bars in some areas, and Germany is calling the surge in COVID-19 cases a “broad second wave.” European Central Bank officials continue to stress the need for stimulative monetary policies. ECB official Francois Villeroy said that their accommodative monetary stance is appropriate. EURUSD is also on the defensive as Brexit trade talks come down to the wire.
GBPUSD plunged from 1.3030 to 1.2910 on Brexit headlines and the increased risk that the talks end without a deal. The consensus belief is that the UK would suffer far more from a “no-deal” Brexit than the Eurozone, giving a 1.2500 target for GBPUSD.
The Canadian dollar is a bystander in the global drama. USDCAD is tracking broad US dollar moves, particularly those of EURUSD. Domestic politics or economic data is not a factor for traders.
The weekly US jobless claims data and the Philadelphia Fed Manufacturing Survey are on tap.
Today’s Suggested Range USD/CAD: 1.3150 – 1.3250