Risk and uncertainty hinder markets
Friday 10 July, 2020
Daily Currency UpdateEmployment gains released today by StatsCan reflect positive economic gains, but the uptick in COVID-19 cases and added geopolitical uncertainty are weighing on upward risk-on moves in the currency markets.
From February to April, 5.5 million Canadian workers were affected by the COVID-19 economic shutdown. By the week of June 14 to June 20, the number of workers affected by the COVID-19 economic shutdown was 3.1 million, a reduction since April of 43%.
Despite these positive signs, currency markets continue to mimic equity markets as traders seek to maximize the little profits they can from volatility. The S&P 500 drifted lower as risk appetite faltered following a surge in coronavirus cases, and the Canadian dollar dropped against the dollar.
Sixty thousand new cases were reported on Wednesday with over 900 fatalities recorded, the biggest daily death rate since early June. With COVID-19 spreading across the US, hopes of a full-scale re-opening are rapidly fading as states and governors rush to re-impose social distancing restrictions in a bid to contain the spread and ease the burden on the healthcare system.
Key MoversThe Australian dollar drifted lower through trade on Thursday, having failed to extend the weeks early uptick and push through 0.70 US cents. The AUD traded sideways for much of the domestic session, maintaining a 25-point range and bouncing between 0.6973 and 0.6996, before shifting back toward 0.6950 as risk appetite faltered. Markets shifted focus toward haven assets, following a ruling by the US supreme court that will allow New York prosecutors access to President Trump’s financial records. Equities and risk correlated currencies were forced lower in the minutes following the verdict as the possibility for further political instability added to the environment of uncertainty.
After UK Chancellor of the Exchequer Rishi Sunak's statement on Wednesday, sterling rose across the board. Investors welcomed the extra fiscal stimulus. GBP/USD topped out at around 1.2670, however has since fallen back as risk-off trade sees a flight to haven assets. Its cause wasn't aided by the EU's chief Brexit negotiator advising that there were still big gaps between the two sides after its latest round of talks. We can expect Brexit to have a bigger influence on sterling’s value the deeper we go into 2020, especially from September onwards.
- CAD/AUD: 1.055 - 1.060 ▲
- USD/CAD: 1.356 - 1.362 ▲
- GBP/CAD: 1.710 - 1.720 ▼
- EUR/CAD: 1.532 - 1.538 ▼