The Canadian dollar is on a tear, perhaps invigorated by the Victoria Day long weekend. USD/CAD dropped 0.0200 points, falling from $1.4109 at Friday’s close to $1.3909 in Toronto, as the currency pair rode the coat-tails of a sweeping G-10 major currency rally against the US dollar. The Canadian dollar rally got an additional boost from oil prices.
West Texas Intermediate soared over 38% since May 11. Oil price gains continue to be supported by last weeks API and EIA crude inventories data showing U.S. inventories dropped. Oil traders expect the easing of coronavirus lockdown restrictions will stimulate demand, which was evident after U.S. gasoline usage increased by two million barrels per day, since April. Crude production cuts by the Organization of the Petroleum Exporting Countries, alongside Saudi Arabia’s previously announced reduction of June output, continue to support prices.
Traders want risk sentiment to be positive and see the easing of COVID-19 restrictions in many European, American, and Canadian jurisdictions as a step in the right direction. Reports from many regions that the number of new coronavirus cases continues to fall were encouraging. Wall Street traders jumped all over a report from Moderna Therapeutics about positive early results from testing of a COVID-19 vaccine sent the Dow Jones Industrial Index soaring yesterday.
French President Emmanuel Macron and German Chancellor Angela Merkel announced they support a proposal for a €500-billion E.U. bond, to help revitalize the Eurozone economy which has been ravaged by the COPVID-19 pandemic. The plan is not a done deal with Sweden, Denmark, Austria, Netherlands opposed to the so-called corona bond. Nevertheless, EUR/USD rallied rising from $1.0802 yesterday to $1.0975 in early Toronto trading. The single currency got a bit of added support after the German ZEW Economic Sentiment survey surprised with a reading of 51 in May compared to 28.2 in April.
GBP/USD extended last week’s losses when it opened in Asia, yesterday. Prices were under pressure following adverse reports about the U.K. and E.U. trade talks. However, those concerns were alleviated somewhat when the British government announced plans to release a draft of their negotiation stance this week.
Traders ignored today’s U.K. employment report.
U.S. Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell’s testimony before the Senate Banking Committee today will be closely watched. Traders will also take direction from Wall Street.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
