Daily Currency Update

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Loonie falls with equity markets

CAD - Canadian Dollar

The Canadian dollar has lost only slight ground to the US dollar this morning after equity markets fell more than a percent from the previous day’s close.

An emerging third spike in COVID-19 cases in the US fueled nearly 900,000 new unemployment claims last week. The inability to stabilize jobless claims paralyzed equity markets, and the US dollar gained against the CAD.

More than 898,000 people filed new unemployment claims in the US last week and it was considerably higher than the forecast of 840,000. The job losses are compounded by the lack of federal support. Again, we have another day in which the White House, Republican’s in the Senate, and Democrats have teased concessions on an aid package.

As such, equity markets and the risk appetite for commodity currencies was suppressed.

Key Movers

The Euro traded lower against most of its counterparts yesterday as news that the coronavirus pandemic in Europe is worsening. Italy reported its highest ever daily virus cases while Germany is closing in on its record high. France declared a national state of emergency that will mean curfews for major French cities between 6am-9pm. Investors will be keenly watching European data releases next month when October’s data is released to see just how badly the European economy will be affected. EURUSD has fallen to lows of 1.1715 while GBPEUR is holding back above 1.10 and briefly touched a high of 1.11.

UK chief Brexit negotiator Lord David Frost told Prime Minister Boris Johnson not to walk away from Brexit trade talks because 'deals to cover security and fishing were possible over the next two weeks'. He said that any final decision on whether the UK will stay at the table or walk away towards a no-deal outcome will not come before Friday and will depend on signals from the European Council meeting that is scheduled to begin today. If an extension is put in place, we could see a fall for sterling with GBPUSD holding below 1.30 while a no deal will obviously cause a very sharp decline.

The AUD opens in much the same position this morning having tracked sideways through trade on Wednesday. Despite weakness across US domestic data sets and a broader dollar correction the AUD struggled to maintain any upward momentum bouncing between 0.7155 and 0.7190. The AUD remains vulnerable to broader corrections in the risk narrative, fluctuating in response to changes in market sentiment, driven by global growth and fiscal stimulus expectations and equity performance. Having corrected off year to date highs in early September the AUD is now very much range bound bouncing between 0.71 and 0.7230 with broader support and resistance handles at 0.70/0.7020 and 0.74.

Expected Ranges

EUR/CAD: 1.540 - 1.555 ▼

GBP/AUD: 1.705 - 1.713 ▼

AUD/CAD: 0.932 - 0.942 ▼

USD/CAD: 1.314 - 1.325 ▼