The Canadian dollar rallied alongside the rest of the G-10 major currency pairs overnight, supported by gains in the Australian and New Zealand dollars. AUD/USD climbed steadily, rising from $0.6384 to $0.6468, while NZD/USD rose to $0.6074 from $0.6013.
Global FX risk sentiment stayed positive. China reported that the Wuhan hospitals had discharged the last COVID-19 patient and that country is starting to reopen. Italy announced plans to reopen its economy, slowly. People will be able to move around inside their own regions, funerals, limited to 15 attendees are set to resume, and bars and restaurants will be allowed to reopen for take-out only, next Monday, May 4.
In the U.S., a small number of "backward" states have reopened, perhaps believing that President Trump’s idea of ingesting household disinfectants is a legitimate coronavirus cure.
West Texas Intermediate (WTI) oil prices dropped steadily, falling from $16.94/barrel at Friday’s Toronto close to $13.90/barrel in early trading today. Traders have discounted the massive 10-million-barrel/day production cuts announced by the Organization of the Petroleum Exporting Countries and Russia two weeks ago, which should begin this Friday, May 1. They are more concerned with where the producers will store the existing production. Storage capacity limitations fueled last week’s price drop to negative $37.63 U.S./b price, and traders are worried that the June contract could face the same issues.
EUR/USD traded higher supported by the ongoing unwind of coronavirus-fueled U.S. dollar safe-haven trades. Traders are looking ahead to Wednesday’s Federal Open Market Committee (FOMC) meeting, and Thursday’s European Central Bank meeting. Expectations are low for both meetings due to previously announced initiatives.
GBPUSD rallied, rising from an Asia low of $1.2369 to a European peak of $1.2454. Positive risk sentiment around expected announcements about easing coronavirus restrictions underpinned prices. Prices drifted to 1.2420 in Toronto as U.K. Prime Minister Boris Johnson urged his countrymen to "contain their impatience" about ending the lockdown, due to risks from a second wave of the outbreak.
The Bank of Japan is trying to deal with its COVID-19 outbreak. For the second meeting in a row, the BoJ reduced its 2020 growth forecast and increased monetary stimulus. The BoJ left rates unchanged but lowered the 2020 GDP forecast to -5.0% from -3.0% predicted at the last meeting. Also, BoJ members removed the cap on the amount of Japanese Government Bonds (JGB) they could purchase.
The Canadian dollar direction continues to be at the mercy of broad U.S. dollar sentiment against the G-10 major currencies. There are not any notable U.S. or Canadian economic reports released today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
