Daily Currency Update

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The Loonie rallies amid Fed official monetary policy declarations, the US dollar paring gains, and the crude oil rally.

CAD - Canadian Dollar

The Loonie rallies on a day where there are no economic data releases. As mentioned in other daily commentaries, the Loonie usually follows the mood of the capital markets. In this case, the equity markets are positive and this risk on mood is helping the Loonie to rally 0.1 percent against the U.S. dollar. However, at the time of this writing, the U.S. dollar seems ready to bounce after falling for hours since yesterday afternoon, when a new session opened in Asia.

One of the main macro catalysts came from Saudi Arabia, which will bring down its crude oil production to 7.49 million a day, the lowest in 18 years. Saudi Arabia will probably continue to reduce supply, potentially to 6 million barrels a day, but for now Saudi Arabia says it will cut output by an extra 1 million barrels a day.

Key Movers

It has been a quite a busy morning for the U.S. dollar with speeches by five Fed speakers and the release of inflation numbers. The U.S. dollar has fallen following the release of U.S. consumer prices, which declined by the most in a record in April. The core consumer price index (which excludes food and fuel) fell 0.4 percent after a decrease of 0.1 percent in March, while the expected number was only -0.2 percent. Overall, inflation fell 0.8 percent in April since March.

A significant trigger of the Greenback’s weakness took place after Federal Reserve speakers talked down the notion of negative U.S. interest rates. St Louis Fed President James Bullard said negative rates would not be a good option for the U.S., and Dallas Fed President Robert Kaplan said he would be against negative rates.

Anthony Fauci, the top infectious disease official in the U.S., said he does not see a coronavirus vaccine being ready until fall. He also noted that Americans face needless suffering and death if the economy reopens too soon.

The Japanese Yen has climbed as China's ban of Australian meats generated concern about trade agreements. Furthermore, there is escalating tension between the U.S. and China; the Trump administration moved on Monday to block investments in Chinese stocks by a government retirement fund.

Some Chinese advisers think Beijing should rip up the current trade pact with the U.S. and start over. Donald Trump's effort to shift blame over the pandemic to Beijing angers officials.

Expected Ranges

USD/CAD: 1.3851 - 1.4050 ▼

EUR/CAD: 1.5167 - 1.5293 ▲

GBP/CAD: 1.7206 - 1.7323 ▼

AUD/CAD: 0.9026 - 0.9150 ▲

NZD/CAD: 0.8507 - 0.8582 ▲