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Canadian dollar update – Tuesday May 12, 2020. USD higher, all eyes on Powell.

Canadian dollar update – Tuesday May 12, 2020. USD higher, all eyes on Powell.
Arif Harji
by Arif Harji on May 12, 2020


FX & market recap:

G10 currencies are trading higher against the USD this morning but trends are unremarkable, aside from a quick spurt higher for commodity FX in early dealing, perhaps. Overall, the USD continues to trade in a broad range that has developed since the initial volatility around the coronavirus outbreak a few weeks ago. The dollar index has traded fairly consistently between 99/101 since early April and softness today is developing with the index near the upper end of that range, tilting risks towards some renewed USD softening in the short run.

Canadian dollar highlights:

The CAD is edging off its overnight low against the USD to trade more or less unchanged on the session overall. Firmer crude is providing a bit of a boost for the CAD on the session, the more so perhaps as data yesterday showed heavy crude prices trading at the narrowest discount to WTI since 2008 (near $3) amid production cutbacks. We look for more range trading around the 1.40 point while markets assess domestic and international coronavirus recovery prospects.

Euro highlights:

The common currency is going with the USD mood to pick up a 0.2/3% gain to trade around the ever-familiar 1.0820/30 mark on limited domestic drivers to make the EUR an obvious stand-out. The possibility of an — albeit not unexpected — rebound in cases in countries that have relaxed containment measures and a muted return to growth post quarantine may begin to weigh on the EUR, which remains subdued by the threat to the ECB’s quantitative easing programmes from Germany’s court ruling.

British pound highlights:

The GBP is relatively unchanged after momentarily breaching below the 1.23 mark (again) late last night in line with the broad USD strokes in markets. The pound is lagging the rest of its G10 peers amid the prospect of failed EU trade talks this week and a delay to the to the country’s lockdown exit — which the PM and Downing St also failed to clearly enunciate. Today’s overall dollar action and risk mood in markets is set to drive the GBP amid limited developments at home.

Asia Pacific highlights:

The Chinese yuan has held steady despite pressures from the re-escalating US-China trade war. Investors are optimistic that the truce will broadly hold. Over the weekend, China’s central bank said they will begin “more powerful” policies to provide economic relief from COVID-19.