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Canadian dollar update – Wednesday March 18, 2020. Greenback soars on liquidity fears.

Canadian dollar update – Wednesday March 18, 2020. Greenback soars on liquidity fears.
Albert Edwards
by Albert Edwards on March 18, 2020

CURRENCY MARKET UPDATE

USD stronger as central banks, federal and provincial governments all ask for more emergency stimulus to contain the pandemic. President Trump requested for an additional $850 Billion (with $50 billion for airlines). Liquidity is vanishing after the Federal Reserve’s actions last week and this has caused more demand for the greenback. Airlines are suffering and the government is increasing efforts to assist one of the industries affected most by Covid-19. Markets are now preparing for bailouts in the future for other industries. Meanwhile, retail sales for last month increased 4.3% yearly; however, manufacturing production dropped 0.4% annualized. USD will continue pushing higher until risk sentiment improves.

Canadian dollar highlights:

CAD weaker and reached a 50-month low versus the greenback. Crude oil prices dropped below $27.00 per barrel and Saudi Arabia is showing no signs of reducing supply while still in a price war with Russia. Prime Minister Trudeau is expected to announce additional funds available today; however, the economy is slowing from closed businesses and public services. Ontario declared a state of emergency and other provinces are expected to follow. The central bank is expected to ease rates again soon as markets also anticipate a recession is inevitable. Consumer prices for February available today.

Euro highlights:

EUR stable after the Federal Reserve’s emergency rate cut. The Bank of Japan also slashed rates and said they will increase purchases of exchange-traded funds and assets. Increased fears of the coronavirus spreading have shut down Italy and other Eurozone countries are now in jeopardy. Last week’s stimulus package did not encourage investors (even with loans to banks as low as -0.75%). President Lagarde is under pressure to follow other central banks with rate cuts and this is weighing on EUR. Inflation rate for February expecting 1.4% growth today.

British pound highlights:

GBP weaker as markets digest the Bank of England’s actions to alleviate concerns and add liquidity. The government is taking a firm approach to contain Covid-19 and this continues to weigh on GBP. Meanwhile, the unemployment rate for January increased to 3.9% (from 3.8% previously).

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