The Canadian dollar recouped a large part of yesterday's losses overnight. The rally was sparked by a surprise 8.2% surge in Australia’s March Retail Sales numbers which lifted the commodity currency bloc. Australia was an early victim of the coronavirus pandemic, and the Retail Sales data pointed to large pent-up consumer demand when COVID-19 restrictions ease. Many American states have already started easing restrictions, led by Georgia, South Carolina and Tennessee.
That may be a mistake. The head of the Centers for Disease Control and Prevention warned that a second wave of COVID-19 could be worse as it would coincide with flu season.
The U.S. Senate passed a $484-billion spending bill which increases funding for COVID-19 testing, and it brings the total U.S. coronavirus response to nearly $3 trillion.
Oil prices remain depressed West Texas Intermediate, the North American benchmark and Brent, the European benchmark continue to be depressed. The Organization of the Petroleum Exporting Countries held a conference call yesterday but didn’t agree to anything. Some members are considering implementing planned May cuts immediately, as global storage limitations continue to weigh on prices.
EUR/USD inched higher overnight, rising from $1.0846 top $1.0884 as traders await the outcome of the European Union leaders meeting on Thursday. The E.U. is struggling to agree to a comprehensive coronavirus stimulus package. Traders are hoping they approve the issuance of the so-called corona bond.
U.K. economic data releases were better than expected, which gave a modicum of support to GBP/USD, which was already rising on the back of broad US dollar weakness. U.K. March Consumer Price Index rose 1.6% y/y, as forecast while Producer Price Index and Retail Price data were a tad better than forecast. GBP/USD climbed to $1.2384 from $1.2276.
USD/JPY was directionless in a 107.53-107.86 range. Safe-haven demand for yen due to oil market jitters was offset by a rebound in 10-year U.S. Treasury yields which climbed to 0.592% from 0.553%
Canadian dollar direction is dictated by US dollar sentiment. For now, the modestly improved global risk tone has turned U.S. dollar sentiment bearish, but that could change in a heartbeat, especially if Wall Street price action becomes negative.
Canadian inflation data is on tap today. March CPI is expected to drop to 1.2% from 2.2% in February.
Canadian dollar traders are likely to ignore the results as the Bank of Canada already warned that the results would be weak. There are not any U.S. economic reports of not available today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
