The Canadian dollar inched higher overnight on the back of a jump in West Texas Intermediate (WTI) oil prices. WTI rallied to $22.52 U.S./barrel from $20.79 /b after President Trump expressed optimism that Russia and Saudi Arabia would end their crude price war. Trump’s comments took the sting out of the Energy Information Administration’s weekly oil inventory report, released yesterday.
The EIA reported inventories increased by 13.88 million barrels in the week ending March 27. Oil traders also found solace from a report that China planned to top up their Strategic Oil Reserves.
The 8.3% jump in oil prices injected a dose of optimism into European equity markets, which reversed earlier losses and are positing gains as of mid-day in Europe. U.S. equity futures are in the green, which suggests a positive open on Wall Street today.
However, the positive sentiment will disappear very quickly if the Goldman Sachs forecast that US weekly jobless claims will jump to 11 million, is correct. The number of business closures, layoffs, and size of urban lockdowns reported since last week, means no one should be surprised by a sharp jump in jobless claims. Nevertheless, expectations that US coronavirus cases will continue to climb until mid-April may keep markets on the defensive.
The Canadian dollar gains were in tandem with those of the commodity currency bloc. AUD/USD and NZD/USD managed to hang onto Wednesday’s modest gains, although both currency pairs are weaker than where they started the week.
The lingering impact of Japanese year-end (March 31) positioning held USDJPY to a 107.06-107.56 range overnight. 10-year U.S. Treasury yields traded below last week’s low, falling from 0.627% to 0.577%, which capped topside moves. Price action was also hampered by the presence of sizable option maturities, with strikes in the 107.00 and 107.50 area.
EUR/USD traded with a negative bias and is sitting at $1.0909 in Toronto. The single currency is still feeling the effects of yesterday’s Purchasing Managers Index data. Euro area and German PMI reports were weaker than expected, while the U.S. Institute for Supply Management Manufacturing PMI was better than forecast. The information serves to underscore the outperformance of the US economy compared to the European Union.
GBP/USD surged, climbing from $1.2376 to $1.2474, underpinned by EUR/GBP selling. The sterling outperformance compared to the Euro is because of the aggressive UK government and Bank of England stimulus programs to offset the impact of the coronavirus. European Union officials are struggling to come up with a fiscal stimulus plan.
The Canadian dollar is giving back its overnight gains ahead of this morning jobless claims data but remains underpinned by the rebound in crude prices.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
