Home Daily Commentaries The Loonie is helped by the price of crude oil and a “risk on” market sentiment.

The Loonie is helped by the price of crude oil and a “risk on” market sentiment.

Daily Currency Update

The Loonie continues in a rally mode following the crude oil price action, which was bolstered by supply outages in Venezuela and Iran as a result of US sanctions and coordinated OPEC-led supply curbs.

Furthermore, according to Bloomberg, the OPEC is sending a clear message to Wall Street banks and big investors: If Washington passes the legislation that would allow the US government to sue the cartel, the first victim will be shale. This warning is probably helping the price of crude oil to stay strong this week. Suhail Mohammed Al Mazrouei, the United Arab Emirates oil minister and former president of OPEC, had told a group of US financiers that if the so-called NOPEC bill becomes law, the cartel would stop working and therefore every member would raise production to maximum capacity, causing the crash in oil prices.

We should expect the Loonie to trade quietly today, as there will not be many economic data released until tomorrow (housing data set) and Friday (manufacturing sales numbers).

Technically speaking, the USD/CAD pair still on an uptrend; however, it might test the 1.3300 handle given the price strength of crude oil. For now, key supports and resistances are 1.3305, 1.3250 and 1.3350, 1.3365 respectively.

Key Movers

The US dollar index is falling this morning after economic data failed to provide support to a likely rate increase by the Fed. At the same time, the British Pound remained in focus as lawmakers gear up for a second of three key Brexit votes. There is going to be a vote on a No Deal Brexit later today and a vote on an extension of Article 50 tomorrow.

The US dollar has remained under pressure in the face of the two-month long risk rally. Furthermore, as the pessimism about the US economy, such as fears about the next recession, fades away, market participants might continue selling US dollars. On top of that, the adoption of a dovish tone by the Fed continues to support risky assets, such as emerging market. A dovish Fed is usually bullish for equity markets, but bearish for the US dollar. Probably some other minor factors weakening the US dollar indirectly include Trump's defeat over funding for the wall and the fact that his declaration of a national emergency has divided the Republican Party.

Regarding the US – China trade, something new is the decision by the Chinese delegation to extend their stay in Washington by two days. This implies a new sense of urgency in Beijing, perhaps reflecting continued weakness in Chinese data. It is encouraging though that the two sides seem to be working towards a final agreement as opposed to an interim one.

This morning, durable good orders came in at 0.4 percent versus the -0.4 percent expected. The US dollar shuggered about this good economic data.

It wasn’t a big day for the Euro yesterday, as expected, apart from the wonderful Peter Praet, the incredibly important Chief Economist of the ECB, who took to Twitter to answer questions. Of note, Praet said that, “…negative rates continue to be a powerful tool to reach our price stability objective…the side effects are outweighed but the positive effects” and that the ECB is on its way to reaching its inflation target.

The EUR/USD trades at 1.1308, a 0.19 percent increase this morning.

So Theresa May’s hail mary pass to secure approval for her Withdrawal Agreement was intercepted yesterday by none other than her Attorney General Geoffrey Cox. What does this all mean, well Cox having read through the “concessions” that May secured, refused to materially alter his view saying that “the legal risk remain unchanged” with regards to the Irish backstop issue. At this point, the Pound once again came under vast amounts of pressure dropping both against the dollar and euro before markets remembered that the House of Commons is still very likely to vote against a no deal Brexit later today in a free vote. Tomorrow should be an interesting event therefore as the House of Commons is hauled back in once again to vote on whether to have an extension to Brexit which to many in the public may seem a sensible option to ensure that we have an orderly exit. However, at this point, the resolve of many Tory backbenchers and ERG members may wane if they feel an extension could lead to the UK never leaving.

The GBP/USD pair is trading at 1.3188, almost 1 percent higher this morning.

The Aussie dollar suffered overnight due to the poor showing on the Westpac Consumer Confidence for March which dropped to its lowest since September last year. The reaction for the Aussie dollar was immediate as it slid against both the Pound, the Kiwi, and the US dollar. Importantly this data has become important once again as the RBA has shifted its outlook over the last few months towards neutral in terms of future interest rates. The AUD/USD pair trades at 0.7069, a 0.16 percent decrease this morning.

The Kiwi was dragged lower overnight by the weak data out of Australia as the currencies find each other tied to the hip. Against the US Dollar, the Kiwi is on the back foot and goes to show that it is being dictated to by events elsewhere, as mentioned earlier in the week.

The NZD/USD pair is trading lower at 0.6841, a 0.28 percent fall this morning.

Expected Ranges

  • USD/CAD: 1.3309 - 1.3340 ▼
  • CAD/EUR: 0.6600 - 0.6650 ▲
  • CAD/GBP: 0.5657 - 0.5750 ▼
  • CAD/AUD: 1.0600 - 1.0649 ▲
  • CAD/NZD: 1.0940 - 1.0990 ▲