Daily Currency Update

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The Loonie falls as risk returns following increased tensions between the US and China over Hong Kong.

CAD - Canadian Dollar

The Loonie suffers some losses against the Greenback as market participants anticipate increased US - China tension over Hong Kong. Emerging doubts about the strength of China’s economic recovery were also a catalyst for a weak Loonie. At the same time, crude oil fell around 4 percent from the highest level in more than two months.

Canada’s March retail sales, as expected, showed a sharp decline in most retail categories, though sales excluding the auto component were a beat. The Canadian dollar stayed lower versus the Mexican Peso and versus the Pound by 0.16 percent.

Crude oil also was under pressure when the U.S. Oil Fund said it is unable to buy more oil futures following intervention by regulators. The constraints are a flag that the fund has been pressured to limit its size after growing rapidly during the oil price crash.

Key Movers

The US dollar has advances 0.42 percent versus a basket of majors currencies, and it has gained 0.53 versus the Euro. The US is considering economic penalties for China in relation to their plan to enact sweeping national security legislation in Hong Kong. White House economic aide Kevin Hassett said on CNN, “We’re absolutely not going to give China a pass. All the options are on the table .. If Hong Kong stops being Hong Kong, the open place it is, then it is no longer going to be the financial center that it is ... and that’s going to be very costly to China and the people of Hong Kong. So, yeah, I think it is a very difficult, scary move and that it is something that people need to pay close attention to.”

Covid-19 continued to take jobs in every US state in April. The largest deterioration in the labour market occurred in Michigan, Vermont, and New York. In Michigan, payrolls have plummeted by 22.8 percent (a little over 1 million) to to 3.4 million since the prior month. Meanwhile, the unemployment rate jumped to 14.7 percent, the highest in government records dating back to the 1940s. The unemployment rates in 43 states were the highest on records dating back to 1976. The jobless rates in Nevada and Hawaii exceeded their previous records by more than 10 percentage points each.

In overnight trading, New Zealand announced some new stimulus spending after retail sales fell to -0.7 percent versus the previous month’s 0 percent.

Japan held an emergency meeting to deliver its monetary policy statement, launching a new lending program to support small businesses, but it did not commit to major stimulus.

UK Retail Sales shows no signs of recovery just yet with the latest figure coming in at -18.1 percent.

Expected Ranges

USD/CAD: 1.4000 - 1.4036 ▼

EUR/CAD: 1.5225 - 1.5300 ▼

GBP/CAD: 1.7000 - 1.7145 ▲

AUD/CAD: 0.9123 - 0.9160 ▼

NZD/CAD: 0.8510 - 0.8582 ▼