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Canadian dollar update – Wednesday March 25, 2020. Risk appetite returns as global stocks surge after new stimulus bill.

Canadian dollar update – Wednesday March 25, 2020. Risk appetite returns as global stocks surge after new stimulus bill.
Albert Edwards
by Albert Edwards on March 25, 2020

CURRENCY MARKET UPDATE

U.S. dollar highlights:

There is nothing like a few trillion in government dollars to help ease the pain from the COVID-10 outbreak. The US politicians finally agreed to a deal in the wee hours of the morning today. They approved plans for issuing $1,200 checks to many Americans, creating a $367 billion small business loan program and a $500 billion program for industries, cities and states.

Canadian dollar highlights:

USD/CAD dropped from 1.4460, where it closed yesterday to 1.4299 just before NY opened, then bounced to 1.4360. The minority Canadian government secured a deal with opposition parties for the planned $82.0 billion COVID-19 stimulus plan.  The deal was in question when the Liberal caucus tried to give themselves unlimited tax and spend powers without the need for parliamentary approval, which is akin to leaving the brewery doors open for a Frat party.

Euro highlights:

EUR/USD climbed steadily overnight, rising from 1.0762 to 1.0849 and opening in NY near the peak. News of the US stimulus package, combined with last week’s ECB stimulus measures, gave traders who were short EURUSD, an excuse to book some profits. Worse than expected German IFO survey results were ignored.

British pound highlights:

GBP/USD mirrored EUR/USD moves, rising to 1.1972 from 1.1751. UK fiscal and monetary stimulus packages combined with the news of the US $2 trillion package fueled the rally. UK February CPI rose 0.4%, beating the forecast for a 0.3% rise.February Retail Price index rose 0.5% as expected. 

Asia Pacific highlights:

The Japanese government will extend emergency loans to companies trying to bring home overseas production facilities as the coronavirus pandemic severs links in global supply chains. The move comes as the outbreak has exposed risks of offshoring, which picked up after the March 2011 earthquake and tsunami that battered Japanese supply chains .