The Canadian dollar is the worst-performing major G-10 currency pair since Friday's close and it's all because of free-falling oil prices. West Texas Intermediate (WTI) plunged from $18.27 U.S./barrel at Friday's close to $13.00/b in early Toronto trading due to a combination of technical factors and storage constraints.
Members of the Organization of the Petroleum Exporting Countries, Russia and U.S. producers are pumping crude in a race for market share before the May 1 production cuts come into effect, and there is an extreme shortage of buyers due to the coronavirus pandemic. Finding storage is a problem with oil-tankers holding 160 million barrels as of Friday, compared to 80 million barrels at the beginning of the month.
The other key factor driving prices lower is due to futures contract expirings. The May WTI futures contract expires on Thursday and traders are selling it to buy the June (or longer) contracts. Traders sold Canadian dollars alongside the drop in crude prices.
Global FX market direction continues to be dictated by U.S. dollar sentiment, and currently, traders want to own greenbacks. The U.S. economy is considered the best-positioned to absorb the shock of the coronavirus pandemic and therefore likely to rebound the fastest. The Trump administration continues to support the economy with plans for another $450-billion economic aid package for small businesses to be announced this week. The Americans are working on plans to ease self-isolation restrictions and reopen their economy.
New Zealand Prime Minister Jacinda Ardern plans to start relaxing lockdown restrictions as of April 27, claiming "We have done what very few countries have been able to do. We have stopped a wave of devastation." That news gave NZD/USD a lift which was supported by better than expected Q1 202- inflation data.
AUD/USD rallied alongside NZD/USD, but both currencies gave back a large portion of their overnight gains in European and early Toronto trading.
The Peoples Bank of China (PBoC) cut the one- and five-year Loan Prime Rate (LPR). The one-year LPR was reduced by 20 basis points to 3.85% while the five-year LPR was trimmed by 10 bps to 4.65%.
EUR/USD is trading just above its overnight low in a somewhat directionless market with prices contained in a $1.0842-$1.0896 range.
Traders are hoping to hear of additional coronavirus pandemic economic support initiatives after the EU Summit on Thursday..
There aren't any notable economic reports available today leaving oil price movements to dictate USD/CAD direction.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
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