The Canadian dollar opened on a strong note this morning and then extended its gains in early Toronto trading.
Some of the rally is attributed to the rebound in West Texas Intermediate (WTI) oil prices from this week’s unprecedented negative $37.60/barrel low. However, at today’s $16.18/barrel level, WTI oil prices are too low to provide any last support to the Canadian dollar.
Crude prices are underpinned ahead of next week’s scheduled 10 million barrel/day production cuts agreed to by the Organization of the Petroleum Exporting Countries and Russia, which start May 1. The easing of COVID-19 restrictions in some U.S. states and China is helping oil price sentiment.
EUR/USD rebounded from its overnight session low of $1.0728 to reach $1.0805 in early Toronto trading after European Union Chief Brexit negotiator Michel Barnier and U.K. Brexit Secretary David Davis gave a joint press conference. Barnier said, "a fair deal was possible."
EUR/USD hit $1.0728 after German IFO Business Confidence survey results fell to record lows thanks to the coronavirus pandemic. The results were not unexpected, which is why prices rebounded so quickly.
EUR/USD gains may be limited due to disappointment that the E.U. leaders were unable to agree on a recovery plan.
GBP?USD suffered a similar fate as EUR/USD, except its damage was done by a weaker than expected Retail Sales report which showed March Sales dropping 5.1% rather than the -4% predicted.
Prices quickly recovered during the Barnier/Davis press conference.
USD/JPY traded sideways in a quieter than usual Asia market as Australia and New Zealand markets were closed for ANZAC day. The Bank of Japan is rumoured to be considering removing its cap on government bond purchases.
Wall Street is poised to open with a small gain, helped by news that President Trump will sign the latest $485 billion spending bill. U.S. Durable Goods and Michigan Consumer Sentiment reports are due today. FX reactions to the data are likely to be short-lived as the focus continues to be on the coronavirus recovery. Canadian dollar price action is dictated by U.S. dollar sentiment and not domestic issues.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
