Daily Currency Update

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The Loonie rallies, but consolidates its gains after the release of building permits data.

CAD - Canadian Dollar

The USD/CAD pair have slightly fallen, and trading at 1.3786 following the release of building permits data that came in at -17.1 percent versus the prior month’s number of -13.2 percent. On the contrary of what most people think, the mood of the equity markets is one of the main drivers of the Loonie on a daily basis, and the equity market keeps rising. Here is the tricky part: less than two years ago, the mention of more tariffs on China was enough to make the equity market plunge, but now, the negative global news keeps coming. The US wants to delist Chinese stocks from the U.S. stock exchanges. Is this going to continue to influence the Loonie? For now, the Canadian dollar is in demand because it is part of the commodity currency bloc, and the US dollar has been weaker lately. But a first red flag for a weaker Loonie is crude oil falling almost 2 percent this morning. Technically speaking, the USD/CAD already fell from the 1.4000 handle this week, and it tested a low of 1.3728 early today. However, this looks like a strong level for the USD/CAD to bounce because it coincides with an over 2-month low (March 12th), when Prime Minister Justin Trudeau announced the first steps to help mitigate the impact of the rapidly spreading Covid-19.

Key Movers

European Union officials boosted the Euro against the U.S. dollar, but it was short lived. They are proposing a €725-billion Covid-19 relief fund, which is a fiscal stimulus package composed of loans and grants (and larger than the French-German proposal). There is still a lot of work ahead, as the plan needs the unanimous agreement of all 27 EU members. So far, Denmark, Sweden, Austria and the Netherlands don’t agree with the plan. ECB President Christine Lagarde previously warned that the EU Gross Domestic Product would fall by about 8 to 12 percent in 2020. If this plan were implemented, this fund would be massive and not only support the European recovery, but it would also demonstrate solidarity. This plan is called, “Next Generation EU,” and it is very ambitious because it plans to borrow €750bn from the markets with plans to repay within a three-decade window from 2028 to 2058 through the EU budget. The EU would pay it back by raising its own resources through taxing large corporations, emission trading schemes, and a carbon border adjustment mechanism.

Expected Ranges

USD/CAD: 1.3737 - 1.3851 ▲

EUR/CAD: 1.5100 - 1.5189 ▼

GBP/CAD: 1.6800 - 1.6903 ▼

AUD/CAD: 0.9066 - 0.9113 ▲

NZD/CAD: 0.8470 - 0.8525 ▼