The Canadian dollar is feeling unloved on Valentine’s Day. The other two currencies in the commodity bloc troika, AUDUSD and NZDUSD have surged in the past few days and the Canadian dollar has edged lower.
NZDUSD got an added lift yesterday when the Reserve Bank of New Zealand policy statement was not as dovish as expected. AUDUSD lagged the Kiwi rally due to the selling of AUDNZD. Nevertheless, both currency pairs are higher than they were at Monday’s Toronto open. The Canadian dollar is underperformed during the same period. It has given back nearly all its gains from Monday despite an improvement in global risk sentiment.
US tariffs on $200 billion worth of Chinese imports are supposed to rise from 10% to 25% on March 1, if China and the US have not reached a trade agreement. President Trump is reportedly considering to extend the deadline for the higher tariffs from March 1 until May 31.
The news has helped lift global equity indices and commodity prices, but the Canadian dollar has been left outside, looking in. The Canadian dollar has become more highly correlated with EURUSD price movements than the commodity bloc currencies, and EURUSD has been under continuous pressure this week.
The single currency is weighed down by concerns over how a “no-deal” Brexit will impact the European Union as well as the lingering impact of the latest dovish twist from the European Central Bank. Also, political strife in Spain and ongoing concerns around Italian spending are also negative factors.
President Trump is expected to sign the latest budget deal that not only prevents another US government shutdown on Friday but gives him some funding for his border wall. US equity markets have rallied on the news, but the improved sentiment did not translate into Canadian dollar gains.
Oil prices have surged higher since Monday. WTI rose 5.6%. as of this morning. The combination of Opec production cuts and Saudi Arabia’s promise to March production by 500,000 barrels per day and the hopes of a US/China trade deal have underpinned prices. The Canadian dollar has drifted lower despite those gains.
US December Retail Sales fell 1.2%, well below the forecast of a 0.2% increase. According to Bloomberg, it was the worst drop in 9 years. However, the data is likely to have been negatively affected by the US government shutdown. Even so, FX markets rallied on the result, except for the Canadian dollar. US PPI and Initial Jobless Claims reports were also below expectations.
