The US dollar is lower against the Canadian dollar on Tuesday morning in a correction from the big gains on Monday after US economic data came in hotter than expected. A rebound in the price of oil after entering a bear market assisted gains in the Loonie.
USD/CAD was lower by 16 pips (-0.11%) to 1.3276 with a daily range of 1.327 to 1.33 as of 9.30am GMT. The currency pair slid at the onset of European trading in a small correction of the gains made yesterday afternoon.
The dollar gained 0.41% against the Loonie on Monday thanks to better economic data from the United States and further deterioration in the oil price.
Canadian dollar
Oil prices, a big export market for Canada were firmer on Tuesday. Oil prices rose after news broke that OPEC, the Middle East-based oil cartel and partner nations like Russia would discuss production cuts at a meeting in Vienna. If big oil producing nations cut production, it reduces the supply of oil available to buy which tends to push prices higher.
The cartel and its partners typically only meet twice a year to discuss production quotas, and the next meeting is due in the summer. However, there could be an extra meeting scheduled for February 14 & 15. The reason is that oil prices have fallen sharply in the past month, technically entering a “bear market” – meaning a 20% decline in price from the most recent peak.
The detrimental effects of the coronavirus and more specifically the travel restrictions and associated lockdown of large swathes of China has caused a so-called demand-shock. A demand shock is when demand suddenly drops, most often due to an economic recession.
US Dollar
The dollar got a lift on Monday when manufacturing data was reported as recovering at faster pace than expected in February. The ISM manufacturing PMI jumped to 50.9 in January from 47.8 in December. The change is significant because a reading above 50 denotes expansion in the sector while a number below 50 means contraction. The data confirms what economists have been forecasting, namely a US economic rebound led by manufacturing after the US completed a phase one trade deal with China.