The Canadian dollar is on a roll.
Traders ignored a massive surge in Canadian job loss numbers for March and a post-OPEC/Non-OPECdeal plunge in oil prices.
Thursday, Statistics Canada announced that more than one million jobs were lost in March. Normally, that kind of data would be seriously bad news for the Canadian dollar, but these are not normal times. Massive job losses are the norm for global economies as the COVID-19 pandemic forced businesses to slash payrolls to stay afloat. An ugly report was expected, and the data was mostly ignored. Instead, traders focused on positive news from the Organization of the Petroleum Exporting Countries and out of the U.S. and bought Canadian dollars.
West Texas Intermediate oil prices surged to $28.15/barrel on Thursday after news that OPEC, Russia, and Non-OPEC countries agreed to a massive cut in crude production. Global production will be reduced by "10.0 mb/d, starting on 1 May 2020, for an initial period of two months that concludes on 30 June 2020. For the subsequent period of 6 months, from 1 July 2020 to 31 December 2020, the total adjustment agreed will be 8.0 mb/d. It will be followed by a 6.0 mb/d adjustment for a period of 16 months, from 1 January 2021 to 30 April 2022."
The rally was short-lived.
Prices dropped to a low of $21.71 U.S./barrel in Toronto today as the cuts will not have much impact on the existing oil glut and falling demand environment. Traders were also spooked by news that Saudi Arabia slashed its May, crude benchmark price for Asian clients.
China’s March trade report was better than expected, which helped to underpin the positive risk tone for markets.
China posted a $19.9-billion trade surplus in March, much better than February’s $7.09-billion deficit. The easing of lockdown restrictions in Wuhan, ground zero for the COVID-19 pandemic, also helped the risk tone.
The U.S. dollar closed on Thursday with losses against the major G-10 currencies and it extended those losses overnight, undermined by the China trade report, the OPEC agreement, soothing words from Fed Chair Jerome Powell, and talk of reopening the US economy by May 1.
Powell defended the Fed’s $2.3 trillion stimulus plan, and said: "there is no limit to how much quantitative easing the Fed can do."
Canadian dollar traders are awaiting tomorrow’s Bank of Canada monetary policy meeting statement and press conference for fresh insight into the domestic outlook.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
