Changes in the BoC leadership might create more volatility in the Loonie crosses.
Daily Currency Update
"Key Movers
The USD/CAD trades slightly higher at 1.4097 following strength in the Greenback. It is important to note that despite the Loonie having its own fundamentals and drivers, such as crude oil and market risk sentiment, it can also be positively correlated to the Greenback, especially when the Euro and Pound suffer big losses such as today. The Canadian dollar gains 0.63 and 0.64 percent versus the Pound and the Euro. The main driver of the Loonie has not been crude oil lately; instead, it has been equity market volatility (the higher the volatility, the lower the Loonie). With equity markets falling today, the U.S. dollar trades higher than the Loonie, but given the temporary positive correlation between the two North American currencies, the Loonie has increased versus all G10 currencies except for the Greenback and the Japanese Yen this morning.The Canadian Government named Tiff Macklem as successor of Stephen Poloz to head the nation’s central bank. Macklem is a veteran of the 2008-2009 financial crisis. Last Friday, the Canadian dollar lost the most since mid-April after Macklem said that negative rates are among the tools the central bank could use to support the economy.
A continuation of the U.S.-China trade spat seems to be the perfect catalyst for a strong U.S. dollar again. This morning, the U.S dollar has advanced after a renewed flare-up in US-China relations and last Friday's hit to global stock markets due to weakening Q1 GDP numbers in the US, China and Europe. Donald Trump has escalated his attacks against China at a White House coronavirus briefing, citing evidence that Covid-19 had originated from a scientific laboratory in Wuhan and he also raised the prospect of using tariffs against Beijing. The Greenback is already outperforming all G-10 peers this year, with the exception of the Japanese Yen and Swiss Franc. Demand for liquidity and a risk off mode in the capital markets will keep the Greenback strong.
U.K. Prime Minister Boris Johnson is preparing to give advice on different activities, including workplace practices. The Bank of England monetary policy meeting is this Thursday. The GBP/USD pair falls 0.65 percent. The EUR/USD is also decreasing 0.72 percent, and it is trading slightly above the 1.0900 handle. Eurozone Markit April final manufacturing fell 0.2 to 33.4.