Daily Currency Update

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Bank of Canada Today Cuts Key Rate for the Third Time this Month

CAD - Canadian Dollar

The Bank of Canada cut its overnight lending rate by 0.50% to 0.25% today. The Central Bank stated the cut would support the Canadian financial system, and add a needed boost to the economy. The BOC also introduces a commercial paper purchasing program as well as buy a minimum of $5B in government securities per week. Governor Poloz said that the Bank is not contemplating negative rates but is ready to take further action if and when required. The loonie fell against all its G10 counterparts at the announcement. The Canadian dollar has been one of the worst-performing currencies this year. A collapse in oil prices is due to a downturn in global demand, an oil price war that does not generate any headlines due to COVID-19 being the world's biggest concern. WTI Crude Oil trades at 21.76 per barrel this morning down another 3.58%. American oil production sites are shutting down, and industry participants are expecting the biggest idling of wells in 35 years. As the Canadian is mostly an export-oriented economy market participants, do expect the slump in loonie pricing to continue into the coming quarter.

Key Movers

The US dollar retreated for a third consecutive session as risk sentiment continues to improve, and markets look to correct the USD overshoot. With liquidity pressures easing, investors are unwinding USD shorts forcing the greenback lower against most major counterparts. While markets are mainly ignoring dire macroeconomic indicators, yesterday's US jobless claims were keenly anticipated as a marker that could drive further stimulus measures. US unemployment filings rose at an unprecedented pace with more than 3 million Americans registering for unemployment, prompting investors to begin pricing in need for additional fiscal support. With the US now surpassing China with the most significant number of COVID-19 cases worldwide, there are fears the angst across the country and economy extend well into the second half of 2020.
The euro jumped over 1%, pushing through 1.10 while the dollar slipped back below 110 Japanese yen. The Great British pound continued its recovery rallying nearly 2.55 and back through 1.20, touching 1.2174 while the Canadian dollar pushed back through 0.70 US cents.
While attentions remain squarely affixed to the unfolding coronavirus pandemic, there is scope for further US softness as risk appetite improves. However, we expect the USD to continue mostly well bid as the pall of uncertainty cast by COVID-19 and month /quarter-end rebalancing drive demand for the world's base currency.

Expected Ranges

USD/CAD: 1.3989 - 1.4158 ▲

EUR/CAD: 1.5442 - 1.5536 ▲

GBP/CAD: 1.7069 - 1.735 ▲

AUD/CAD: 0.8498 - 0.8580 ▲

NZD/CAD: 0.8388 - 0.8424 ▲