The US dollar is higher against the Canadian dollar on Tuesday morning, adding to the multi-week highs posted yesterday. While some signs of a tentative recovery in risk sentiment is on display in stock markets, another downturn in oil prices is hurting the commodity-linked Loonie.
USD/CAD was higher by 15 pips (+0.11%) to 1.3200 with a daily range of 1.318 to 1.32 as of 9.30am GMT. Having made a modest move lower during Asian trading hours, the currency pair turned higher and went on to mark yet another 2020 high.
The exchange rate between the US and Canadian currencies has been appreciating in the past week. Traders have preferred the security of US dollars and have backed away from Canadian dollar because of its historically high correlation with oil prices. Brent crude oil futures are down 0.5% in early trading on Tuesday, setting up a sixth straight daily loss.
Markets are pricing in less oil demand, particularly from China but also globally as travel restrictions curtail fuel usage. With modern technology it is even possible to track the reduction in flights in and out of China to make a judgement about the impact on oil demand.
The losses in risky currencies and oil prices both come as concern remains about the status of the coronavirus outbreak in China. Both the United States and Canada have warned against residents travelling to China with the deadly virus now having claimed 106 lives and infected over 4,500 people, with one case also confirmed in Germany. Several Western countries have issued travel warnings regarding flights to China, and Facebook has advised employees not to travel to China unless urgent. The UK, Canada, the United States and other countries are planning to evacuate citizens out of Hubei province where the virus originated.
After a patch light in economic data, there is more happening in the United States today that could steal some attention away from the coronavirus. Economic data includes US house price data, durable goods orders, and consumer confidence survey results.