The Canadian dollar traded in a choppy fashion overnight. Asia opened in a good mood. Risk sentiment was positive after U.S. stocks finished on Friday with strong gains, led by a nearly 2.0% increase in the Dow Jones Industrial Average (DJIA). Traders were encouraged by reports that the number of COVID-19 cases being reported was in decline. New Zealand Prime Minister Jacinda Ardern said she would phase out the coronavirus lockdown by May 21.
NZD/USD tried to rally on the news, but gains were stymied by ugly Electronic Card Retail Sales data which plunged 46.8% in April. Europe opened in a bad mood and sold the commodity currency bloc. NZD/USD dropped from $0.6155 to $0.6067 in early Toronto trading.
Traders are also cautious ahead of the Reserve Bank of New Zealand policy meeting due Wednesday.
AUD/USD managed to rally from $0.6515 to $0.6560 in Asia, underpinned by the positive risk sentiment and news that the Peoples Bank of China (PBoC) was considering additional stimulus measures.
Those gains were erased by the risk aversion sentiment seen in Europe and prices dropped from $0.6560 to $0.6467 in Toronto.
The plunge in the antipodean currency pairs skewered the Canadian dollar. USD/CAD dropped to $1.3902 at the Asia open, despite Statistics Canada reporting record job losses on Friday. Canada lost two million jobs, and initially, the report was viewed as good news. The forecast was for a loss of four million.
It wasn’t. Those jobs are not going to magically reappear next month or even the month after that. The fallout from the lockdown measures taken to combat the pandemic will reverberate for years to come. Businesses did not close just temporarily; many folded, unable to withstand the cash losses.
The government does not have the money to pay for Trudeau’s daily multi-billion-dollar announcements, and the destruction of the oil industry will greatly reduce one of its sources of income. That just leaves higher taxes, and international investors won’t be lining up to invest in a high-tax jurisdiction.
The U.S. dollar is trading with a firm bias in Toronto, managing to record gains against the major G-10 currencies since Friday’s close. There are not any economic data releases from Canada or the U.S. today, which leaves equity markets to provide direction. S&P futures are down, which suggests a negative open on Wall Street, and by default, ongoing negative risk sentiment.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
