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Canadian dollar update – Monday February 24, 2020. CAD rebounds after oil retreats and markets prefer safe havens Gold and JPY.

Canadian dollar update – Monday February 24, 2020. CAD rebounds after oil retreats and markets prefer safe havens Gold and JPY.
Albert Edwards
by Albert Edwards on February 24, 2020

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD weaker as fears of the coronavirus spreading caused more interest in the world’s biggest creditor nation. The JPY always strengthens during political or financial stress as more cases were reported beyond China’s Hubei province (including South Korea). Increased demand for safety also causing gold prices to surge and stocks lower. Meanwhile, the manufacturing index for February dropped to 50.8 reading (from 51.9 previously) and the services index contracted to 49.4 reading (from 53.4 previously). A stall in business activity added to market fears about economic growth. All eyes this week on the GDP growth rate for Q4 (available on Thursday) and coronavirus developments.

Canadian dollar highlights:

CAD stronger as retail sales rose 2.4% annually in December amid risk aversion and weaker oil prices. More reported cases of the outbreak caused added uncertainty about global demand and OPEC producers will not slow output. Domestic pipeline protests will keep CAD defensive as key sectors of the economy have slowed. All eyes this week on Bank of Canada Deputy Governor Timothy Lane’s speech tomorrow, Producer Prices for January and GDP growth rate for December (both available on Friday).

Euro highlights:

EUR steady after Germany’s services industry expanded in February, offsetting the recession in manufacturing. Business activity in the Eurozone also expanded higher than expected to support EUR. Consumer prices for January was on target at 1.4% yearly, while core inflation was 1.1% (also as expected but previously 1.3%). EUR remains vulnerable as the threat of a recession in the Eurozone increases. All eyes this week on central bank President Christine Lagarde’s speech on Wednesday and Chief Economist Philip Lane’s speech on Thursday.

British pound highlights:

GBP firm after factory activity increased in February to the highest level since last April. This offset the slowing services sector and the rebound in retail sales. GBP support the past week was mainly due to optimism from Prime Minister Johnson’s newly appointed finance minister, who is expected to increase spending. All eyes this week on Brexit trade developments and Bank of England Deputy Governor Stephen Cunliffe’s speech on Friday.