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Canadian dollar update – Wednesday February 26, 2020. Markets tumble amid pandemic fears and oil prices drop.

Canadian dollar update – Wednesday February 26, 2020. Markets tumble amid pandemic fears and oil prices drop.
Albert Edwards
by Albert Edwards on February 26, 2020

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD firm as outbreaks outside of China continue to worsen. Markets are now concerned the virus has reached pandemic levels and this will continue to support safe havens (Gold, USD, JPY, CHF). The World Health Organization was in Italy on Monday to help limit further cases. Meanwhile, more than 970 cases have been confirmed from South Korea. China postponed the National People’s Congress and President Xi Jinping warned that the coronavirus is the worst health crisis in the country. The U.S. 10-year yields reached an all time low and Dow plunged nearly 2,000 points the past two days. This has caused markets to speculate another rate cut from the Federal Reserve next month. New Home sales for January expecting 0.71 Million/3.5% increase monthly today and Q4 GDP Growth rate for Q4 available tomorrow.

Canadian dollar highlights:

CAD defensive after crude oil prices dropped below $50.00 per barrel. The economy is also under pressure after rail blockades affected employment and growth the past 2 weeks. The Royal Canadian Mounted Police arrested a few protesters and removed several blockades to ensure some trains were able to move. However, an additional blockade was launched in Hamilton and the situation will be closely monitored as tensions rise. Producer Prices for January expecting to increase 0.1% monthly and 0.7% yearly on Friday.

Euro highlights:

EUR stable after a positive German business climate survey (but German 10-year treasuries also dropped to the lowest levels since last October). Germany’s Q4 GDP was 0.0% (as expected). Meanwhile, increased fears of a contagion in the Eurozone continue weighing on EUR. Markets prefer to support safe havens amid increasing virus cases in Italy (with the highest number of infections outside of Asia). European Central Bank President Christine Lagarde speaks today.

British pound highlights:

GBP firm as markets wait for tomorrow’s negotiating mandate with the European Union and next week’s trade discussions. Increasing tensions will weigh on GBP as Prime Minister Boris Johnson is under pressure to avoid a no trade deal by the end of this year. Bank of England Deputy Governor Jonathan Cunliffe speaks tomorrow, and Chief Economist Andrew Haldane speaks on Friday.