The Canadian dollar plunged overnight, following a 4.2% drop in West Texas Intermediate oil prices.
WTI closed Friday at $53.46 U.S., then plummeted to $51.22 overnight. Prices are hovering just above their overnight low, in early Toronto trading.
A steep jump in the number of coronavirus cases outside of China, with South Korea and Italy reporting a sharp increase in COVID-19 cases, sparked fears of a pandemic. The Canadian dollar, alongside its commodity currency bloc cousins, the Australian and New Zealand dollars were sold aggressively.
NZD/USD losses were exacerbated by mixed to soft retail sales reports. NZD/USD dropped to $0.6306 from $0.6342 while AUD/USD fell to $0.6587 from $0.6622.
USD/JPY sank on the back of fresh risk-aversion sentiment and soft U.S. Treasury yields. However, the losses were shallow, and prices stayed well above last weeks low. USD/JPY continues to be supported by the outperformance of the U.S. economy compared to Japan, and greenback demand as Japanese investors sell JPY to buy U.S. assets.
EUR/USD is in a similar boat as the Japanese yen. Euro-zone growth is anemic while the American economy is in much better shape. The single currency is also suffering from a spike in risk aversion sentiment as Italy now has over 200 confirmed coronavirus cases. Traders fear the outbreak will spread throughout Europe. EUR/USD dropped from $1.0850 to $1.0806 on the news but bounced to $1.0820 when German IFO Survey results were better than expected.
GBP/USD is trading at $1.2904, just above its overnight low of $1.2888, with prices tracking EUR/USD movements.
There wasn’t any U.K. data of note, but prices may get a bit of support when government officials outline their U.S. trade negotiation objectives.
Canada December Retail Sales for December were flat. The data, released on Friday, was as expected and gave the domestic currency a bit of a lift. However, other domestic developments limited the currency’s upside.
The Trudeau government has failed to end the Indigenous railway blockade, which is being exploited by left-wing climate anarchists. RBC economists predict that the blockade could knock 0.2% of Q1 2020 Gross Domestic Product growth if it persists. Another negative for the economy is the news that Teck resources have pulled their application for their Frontier oil sands mine due to a lack of clarity on the governments climate-change policy. That sends a "Canada-is-closed-to-business" signal to global investors.
There are not any U.S. economic reports of note today, leaving equity markets to provide FX direction. Fears of a coronavirus pandemic fueled stock market losses in Europe and U.S. equity futures point to an ugly open for Wall Street.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
