The Canadian dollar opened sharply lower compared to yesterday’s close.
USD/CAD climbed from $1.3185 in Asia to $1.3252 in Europe, and prices are just below the top in Toronto trading.
The move was triggered by a wave of safe-haven demand for U.S. dollars as soaring COVID-19 cases in the US, Europe, and the U.K. raised fears that authorities will impose lockdown measures.
President Emmanuel Macron of France will address his nation today as the government is considering a 28-day lockdown for the entire country. German authorities are contemplating a two-week shutdown to help stop the spread of coronavirus. Italy has already imposed strict measures. Things are just as bad in the U.S., with over 73,000 coronavirus cases reported yesterday.
FX traders were also disappointed at the U.S. administrations failure to enact another COVID-19 Relief bill which now appears stalled until January.
EUR/USD extended its losses from yesterday and fell to $1.1732 from $1.1794 at yesterday’s close. The wave of risk-off demand for dollars combined with uncertainty around Thursday’s European Central Bank (ECB) meeting weighed on prices. Some analysts fear that the latest bout of coronavirus lockdowns may force the already dovish European Central Bank to accelerate their stimulus plans, as early as tomorrow.
However, despite the recent weakness, the EUR/USD technicals are bullish while prices are above $1.1670.
GBP/USD plunged to $1.2953 from $1.3047 as safe-haven demand for U.S. dollars exacerbated selling pressure because of rising U.K. coronavirus cases, and the lack of progress in the Brexit negotiations. European Union President Charles Michel suggested that the E.U. was unsure if a U.K. deal was still possible, while France did not show any willingness to compromise on fishing rights.
AUD/USD and NZD/USD managed to squeeze out gains during the Asia session, sparked by better-than-expected Australian inflation data. Those gains were erased during the European session, with both currency pairs posting losses at the Toronto open.
Oil prices slumped after the American Petroleum Institute reported that US crude inventories rose 4.5 million barrels in the week ending October 23.
USD/CAD rallied on the back of broad U.S. dollar strength with lower oil prices contributing to the gains. Today’s Bank of Canada meeting will have little to no impact on FX markets.
The BoC is expected to leave rates, policy, and guidance unchanged, while warning of downside risks due to the coronavirus.
There are not any U.S. economic reports of note today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians