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USD / CAD - Canadian Dollar plunges

- Souring risk sentiment lifts US dollar and sinks CNY.

- Canada Retail Sales expected to fall 0.4% m/m

- US dollar crushes opposition.

USDCAD: open 1.3571-75, overnight range 1.3519-1.3582, close 1.3533, WTI $81.06, Gold, $2166.82

The Canadian dollar got crushed yesterday and overnight. The Loonie’s post-FOMC rally crashed and burned following a couple of central bank monetary policy decisions and US economic data.

USDCAD was happily testing support in the 1.3460 area early yesterday morning. Bearish traders were feeling rather smug after USDCAD had crushed support in the 1.3530 area and were looking for further losses to 1.3360. The “best laid plans of mice and men often go awry.” That is as true today as it was in 1785 when Scottish poet Robert Burns penned the line in his poem “To a Mouse.”

Plans going awry explains yesterday’s and the overnight move. Thursday, the Swiss National Bank surprised markets by cutting the overnight rate by 25 bps. That was followed by a dovish Bank of England monetary policy meeting where officials unanimously agreed to leave rates unchanged. There were two dissenters at the prior meeting. Then Governor Andrew Bailey told the Financial Times that rate cuts were in play at future meetings.

Stronger than expected US weekly jobless claims and housing starts led to speculation that the Fed would keep rates at elevated levels even as the European central banks were cutting them. That meant interest rate differentials would widen in favour of the US and the greenback soared.

EURUSD is just above support after trading in a 1.08808-1.0869 range overnight. Yesterday's surprise rate cut by the Swiss National Bank, combined with stronger-than-expected US data, ignited a broad-based US dollar rally. The single currency saw a bit of support after German economic sentiment improved.

GBPUSD traded in a 1.2575-1.2675 range overnight and is testing the low in New York. The selling pressure is a direct result of dovish comments by Bank of England Governor Andrew Bailey in a Financial Times interview that "rate cuts were in play." Morgan Stanley now expects that UK rates will fall 1.00% in 2024. Earlier, GfK reported that consumer confidence stalled at -21 in March. UK retail sales, excluding fuel, rose 0.2% in March (forecast -0.1%).

USDJPY climbed steadily, rising from 151.26 to 151.87 after yesterday's US data and higher-than-expected inflation. Japan's CPI index was 2.8% year-over-year in February compared with 2.2% in January. The news puts a damper on additional rate hikes, at least in the near term.

AUDUSD is trading negatively in a 0.6510-0.6577 range due to a mix of broad US dollar strength and ongoing Chinese growth concerns.

Canada Retail Sales are expected to decline 0.4%.