The Canadian dollar sank again overnight. Oil market disruptions sank global equity indexes as traders switched into risk aversion trades. The Chicago Mercantile Exchange May contract for West Texas Intermediate (WTI) collapsed and closed at negative $37.63 U.S./barrel, meaning if you owned the May contract, and sold it yesterday, you would have lost a small fortune, as each contract is for 100,000 barrels.
That price action spooked equity traders. The Dow Jones Industrial Average closed yesterday down 2.44%. Asia and European traders followed suit. Japan’s Nikkei 225 lost 1.98%, while the German DAX is down 3.3% as of 8:30 am EDT. S&P equity futures are pointing to a negative open on Wall Street this morning.
The oil price drama is a temporary panic due to an overabundance of supply, extremely low demand, exacerbated by crude storage constraints. WTI crude prices for delivery in September and October are around $27.50/barrel.
U.S. President Trump exacerbated risk aversion sentiment by tweeting "In light of the attack from the Invisible Enemy, as well as the need to protect the jobs of our GREAT American Citizens, I will be signing an Executive Order to temporarily suspend immigration into the United States!"
Parts of Europe and the US are making plans to ease COVID-19 containment restrictions while European Union leaders are just getting ready to discuss the E.U.’s fiscal response to the crisis. Their slow reaction is one factor that is weighing on EUR/USD, which has dropped from $1.0995 on April 14, to $1.0818 today. German ZEW economic sentiment for April surged to 28.2 from -49.5 previously, but the data was ignored.
GBP/USD is suffering because of fears that the July 1 deadline to extend the U.K. Brexit transition beyond December 31, may come and go without an extension. Traders were also unnerved after UK February employment data showed unemployment was rising before the devastation of the pandemic. GBP/USD is trading at the overnight session low of $1.2287 in Toronto, after falling from $1.2443.
AUD/USD suffered on the back of broad US dollar demand and comments by Reserve Bank of Australia Governor Philip Lowe that Australia’s Gross Domestic Product contraction is the worst since the 1930’s.
Canadian Retail Sales rose 0.3% in March, but the news did not have any impact on USDCAD trading.
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Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
