Daily Currency Update

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The Loonie and the U.S. dollar continue to fall following Trump’s lackluster press conference.

CAD - Canadian Dollar

The Canadian dollar fell broadly against its Group-of-10 peers in a world struggling to control the fast-spreading coronavirus. On the flip side, the best currency performers in this risk-off environment are the Euro, Swiss Franc, and Japanese Yen. They are rising 0.75, 0.73 and 0.48 percent respectively versus the U.S. dollar and 0.98, 076, and 0.74 respectively versus the Loonie. These currencies are funding currencies, which means they are usually sold to fund the buying of other currencies, which happens when equity markets are stable or positive. The opposite occurs when there are equity sell-offs, such as today.

The continuation of the sell-off of the Loonie and the U.S. dollar started after President Trump’s press conference offered little in the way of concrete steps to stop the spread of the Coronavirus in the U.S. Immediately after, the risk-off mood gathered pace after the CDC said the first U.S. Coronavirus case is still of unknown origin.

On the release side, Canadian economic data released the 4Q current account balance, which came in at C$ -8.76 billion, versus an expected C$ -8.97 billion. December GDP is due for release tomorrow.

Key Movers

Everyone’s favourite haven, the U.S. dollar, falls. The Greenback has even fallen versus the Chinese Yuan and most of its Group-of-10 and Asian peers.

The curious thing is that the Aussie dollar is rising 0.52 percent versus the U.S. dollar, and the Greenback has hit a 17-day low. The Aussie dollar is a proxy of the Chinese Yuan, but this virus is global now, with the impact being felt even in North America.

The demand for exposure to the Euro continues given the rising chances of fiscal stimulus in the Euro area. This is after reaching their most bearish sentiment for the Euro in five months just ten days ago. ECB President Christine Lagarde said that Germany wanting to temporarily suspend its constitutional debt brake to provide space for regions to spend more is “certainly very welcome.” It is known that a likely ECB response to a crisis is minimal, given its negative rates; therefore, there are increased chances that European governments will provide fiscal stimulus.

Even the former Fed Chair, Janet Yellen, tried to calm the markets when she said yesterday, “If it doesn’t hit substantially in the United States, that’s less likely. We had a pretty solid outlook before this happened -- and there is some risk, but basically, I think the U.S. outlook looks pretty good.”

The spread of the Coronavirus dented risk appetite and sent global equity shares lower.

Expected Ranges

USD/CAD: 1.3333 - 1.3380 ▲

EUR/CAD: 1.4585 - 1.4750 ▲

GBP/CAD: 1.7173 - 1.7250 ▲

AUD/CAD: 0.8750 - 0.8807 ▲

NZD/CAD: 0.8400 - 0.8475 ▲