The Canadian dollar was the worst performing currency overnight and this week. The currency is trading in Toronto near the bottom of its overnight range, as a litany of woes exert downward pressure.
Those woes include Bank of Canada Governor Tiff Macklem admitting that the domestic economy was shrouded in a fog of uncertainty. He thinks the economy will recover in the third quarter, but there said there are plenty of risks to the view, given the unknowns around the pandemic.
The Canadian dollar took another knock when Fitch Ratings Inc stripped Canada of the prestigious AAA long term debt rating. They downgraded downgrading it to AA+ Stable outlook, blaming ballooning government deficits for the cut.
A drop in oil prices from their peak level of $41.60 U.S. to $38.58 in Toronto, today is another negative, as oil traders are concerned about a resurgence of the coronavirus would curtail demand. This week, the International Monetary Fund (IMF) downgraded its global growth outlook. That news sent a ripple of risk aversion sentiment through FX markets and underpinned the U.S. dollar strength vs the majors. The Canadian dollar was collateral damage.
The FX trading week is closing on a relatively quiet note, compared to earlier in the week. On Monday, early in the Asia session, President Trump Advisor Peter Navarro told FOX News the U.S./China Free trade agreement was over. The U.S. dollar spiked, and equities tanked.
Shortly afterwards, Trump denied Navarro’s claim and order was restored.
This week, the NASDAQ made a second consecutive record close despite lingering second-wave COVID-19 outbreak fears. However, when the U.S. reported a surge in new coronavirus cases, which took numbers back to peak outbreak levels, the stock market sank.
Yesterday’s major economic data releases came and went without fanfare, as they were overshadowed by COVID-19 concerns.
The upcoming week is going to be lively thanks to portfolio re-balancing flows and a rare, Thursday US non-farm payrolls report release. June 30 is not just a month-end, but a quarter-end and half-year end as well. Quarterly re-balancing flows may lead to U.S. dollar selling.
Today’s U.S. economic data consists of Personal Consumption Expenditures and Michigan Consumer Sentiment. Once again, the data will play second fiddle to Wall Street moves and CVOID-19 headlines.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
