The Canadian dollar managed to scratch out a small gain overnight, and domestic developments did not have anything to do with the move.
The Canadian dollar got a lift from a shift in global risk sentiment, which turned positive on coronavirus developments.
China reported that the number of new coronavirus cases since January declined. The news supported the view of Chinese epidemiologist Zhong Nanshan who predicted that the outbreak would peak in February. The comments stoked risk-seeking trades and in that environment, oil prices, global equity indexes and commodity currencies, including the Canadian dollar, rallied.
EUR/USD continues to be weighed down by negative sentiment stemming from the latest German political uncertainty, more dovish comments from European Central Bank officials about the need to maintain an accommodative monetary policy, and bearish technicals following the break of support at 1.0940. The dovish comment from the ECB officials contrasted with Fed Chair Powell’s monetary policy outlook. He said the U.S. economy was in a "very good place."
GBP/USD climbed on the back of a profit-taking rally that is squeezing short GBP/USD positions. There is more evidence that the European Union and U.K. trade negotiations will be acrimonious.
U.K. Chancellor of the Exchequer Sayed Javid expects a "permanent equivalence" agreement for the "City" financial services industry. E.U. Chief Negotiator Michel Barnier replied, "don’t kid yourself."
World Health Organization (WHO) officials warned about getting too optimistic. The Head of the Global Outbreak and Response Network said the coronavirus "has spread to other places where it is just the beginning of the outbreak." Singapore, for example, has 47 cases, with hundreds of cases reported in other countries. Those concerns were ignored.
The New Zealand dollar started the Toronto session as the best performing currency against the U.S. dollar today. NZD/USD rallied from $0.6403 to $0.6484 after the Reserve Bank of New Zealand appeared to adopt a neutral to hawkish monetary policy outlook. The RBNZ left the Overnight Cash Rate (OCR) unchanged at 1.00%, which was widely expected. The central bank does not expect the coronavirus to have a lasting negative impact on economic growth. Their economic outlook was upbeat and cited several factors that support growth, which led to the RBNZ forecasting a rate hike in 2021.
AUD/USD climbed on the back of the improved risk tone, rising from 0.6713 to 0.6746. Price gains could accelerate on a decisive break of resistance in the $0.6770 zone.
There are not any top-tier economic data releases from Canada or the U.S. Canadian dollar direction will continue to be driven by oil price moves and risk sentiment.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
