Home Daily Commentaries The Loonie rallies, helped by a less pessimistic ECB and a weakening Greenback

The Loonie rallies, helped by a less pessimistic ECB and a weakening Greenback

Daily Currency Update

CAD - Canadian DollarThe USD/CAD pair falls 0.15 percent (stronger Loonie), helped by Canada's exports that rose 1.3 percent in April. This was mainly due to higher exports of gold. Imports decreased by 1.4 percent, mostly on lower imports of aircraft. As a result, Canada's merchandise trade deficit with the world narrowed from $2.3 billion in March to $966 million in April, the lowest deficit since October 2018.Weak crude oil is not helping the Loonie lately because of fears of a supply glut. US petroleum stockpiles jumped the most in almost 30 years as domestic output hit a record. It seems that until the mood changes regarding the US-China trade war, there are not many reasons to see crude oil improve in the next few days.Technically speaking, the USD/CAD pair has room to fall, but should continue in a long-term uptrend. The next intraday support would be 1.3365, and it might even go to 1.3331, but this one is a critical long-term support. On the upside, important resistance levels to watch are the 1.3400 handle and 1.3430.

Key Movers

The Euro rises as the ECB pushes back rate hike deadline and raises inflation forecast. The ECB said interest rates on its marginal lending facility and the deposit facility would remain unchanged at 0 percent, 0.25 percent and -0.40 percent, respectively. On top of that, the ECB president Mario Draghi signaled a burst of monetary support before his term ends in October. Some key points that pushed the Euro higher at the time of the release were; 1. data about the economy isn't bad, 2. there is no probability of deflation, 3. the drop in market-based inflation expectations is global, 4. there isn't a substantial worsening in the outlook. Draghi mentioned, "the prolonged presence of uncertainties related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets are leaving a mark on economic sentiment." In general, the ECB and Draghi's message were not as dovish as the market was expecting.Officials from Mexico met with their US counterparts to discuss avoiding tariffs, and the US adviser, Peter Navarro, said it could happen if the country agrees to take asylum seekers and boost security in its border with Guatemala. On the flip side, Senate Republicans have threatened to block President Trump's planned tariffs on Mexico. "There is not much support in my conference for tariffs," Senate Majority Leader Mitch McConnell said. However, president Trump said lawmakers would be making a mistake if they try to stop him.

Expected Ranges

  • USD/CAD: 1.3375 - 1.3410 ▼
  • EUR/CAD: 1.5024 - 1.5100 ▲
  • GBP/CAD: 1.6987 - 1.7041 ▼
  • AUD/CAD: 0.9327 - 0.9357 ▼
  • NZD/CAD: 0.8868 - 0.8900 ▲