The Canadian dollar recouped its Friday losses in a mildly positive FX risk environment overnight. Traders are focusing on hopes for a sharp rebound in global economic growth rather than fears about a second-wave of the coronavirus outbreak. Those hopes may be premature.
Sunday, the World Health Organisation (WHO) announced 183,000 new coronavirus cases in the past 24 hours, which according to the Washington Post, is the highest daily rise since the pandemic began. In the U.S., 29 states and territories reported an increase in their seven-day average of new reported coronavirus cases. At the same time, these states are reducing or eliminating previous restrictions implemented to combat COVID-19.
Reserve Bank of Australia Governor Philip Lowe gave AUD/USD a boost. He said that the AUD/USD rebound from its March low was due to how well Australian authorities managed the coronavirus crisis. He said "I would like a lower currency in terms of macroeconomic outcomes — it would help reduce unemployment and lift inflation closer to target — but, at the moment, I think it's really hard to argue that the Australian dollar is overvalued." FX traders agreed and bought AUD/USD from $0.6810 to $0.6892.
NZD/USD rallied along side the Aussie with prices supported ahead of Tuesday’s Reserve Bank of New Zealand policy meeting. Most analysts expect the RBNZ to leave rates and policy unchanged.
Crude oil prices are consolidating last week’s gains. West Texas Intermediate (WTI) climbed from a low of $34.30/barrel on June 15 to $40.52/b on Friday and then spent the overnight session in a $39.18-$40.14 band. Prices continue to be supported by expectations of increased demand as coronavirus restrictions ease and due to the previously announced production cut extension.
EUR/USD rallied on the back of improved risk sentiment and profit-taking after support in the $1.1170 area held. The European Central Bank is expected to provide a detailed explanation of its use of Quantitative Easing when the minutes of the June 4 meeting are released later this week. This is the ECB’s attempt to assuage German High Court concerns about its use of quantitative easing.
GBP/USD rose after comments from Bank of England Governor Andrew Baily seemed to reduce the risk for negative rates. He said the BoE would reduce QE before raising interest rates, which is a U-turn from the previous policy.
The Canadian dollar remains rangebound with direction dictated by U.S. dollar sentiment.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
