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Canadian dollar update – Tuesday February 18, 2020. CAD rebounds on higher oil prices and all eyes on FOMC.

Canadian dollar update – Tuesday February 18, 2020. CAD rebounds on higher oil prices and all eyes on FOMC.
Albert Edwards
by Albert Edwards on February 18, 2020


U.S. dollar highlights:

USD weaker after stocks dropped from record highs and less fears that the coronavirus outbreak would cause more damage. Uncertainty about the real numbers from the epidemic will discourage markets from taking on more risk. However, until there is sufficient evidence that the virus has slowed or receded, markets will continue supporting safe-haven currencies. Meanwhile, retail sales increased 0.3% in January (as expected and previously revised to 0.2% growth in December). Focus for USD this week will be the Producer Prices report for January available on Wednesday in addition to the latest Federal Open Market Committee meeting minutes.

Canadian dollar highlights:

CAD firm and supported by higher crude oil prices during the past week. Increased hopes the virus impact will be temporary and further Chinese central bank stimulus may cause more demand for oil. CAD is still vulnerable because China is the world’s biggest oil exporter while OPEC and the International Energy Agency lowered their demand forecasts due to the outbreak. All eyes this week on January’s Consumer Prices report available tomorrow.

Euro highlights:

EUR weaker and defensive after Eurozone GDP grew by only 0.1% in Q4. France and Italy GDP shrank while Germany remained stable. Meanwhile, employment increased 0.3% in Q4 and 1.0% total in 2019 (higher than 0.8% improvement expected). Eurozone trade surplus also increased in December and European shares dropped from record highs due to an increase in new coronavirus cases. Inflation rate for January available on Friday.

British pound highlights:

GBP firm as markets are more confident Prime Minister Boris Johnson’s new finance minister will unveil a better budget next month. Economic growth is weak and the U.K. may need to expand fiscal spending to deal with the impact of Brexit. Johnson wants to spend more to boost the economy and expansionary fiscal policy could convince the central bank to pause on rate cuts next quarter. Consumer and Producer Prices for January available tomorrow while retail sales for last month available on Thursday.