The US dollar is higher against the Canadian dollar on Monday morning with sentiment having turned sharply more negative at the beginning of the new week in markets, boosting the desire for havens like the dollar. A 1.5% slide in the price of crude oil is reducing the appeal of the Canadian dollar.
USD/CAD was higher by 69 pips (+0.51%) to 1.3290 with a daily range of 1.3245 to 1.3293 as of 9.30am GMT. The currency pair gapped higher after the weekend and has held daily gains just shy of 1.33.
CAD down as coronavirus spreads
The Canadian currency edged higher last week (USD/CAD -0.22%), marking a second week in a row of gains. A recovery in the price of oil alongside fading fears that the coronavirus would have a lasting economic effect had seen traders cautiously buy back the Loonie and sell the greenback. The mood in markets shifted starkly by the end of the week however as the number of cases of the coronavirus spread quickly to other countries including South Korea and Iran.
On Friday, in a symbol of the global economic impact of the coronavirus, US economic data sharply missed expectations, causing traders to sell dollars and replace them with the Canadian currency. A reassessment of the impact the coronavirus is truly having on the US economy is taking place but that doesn’t necessarily mean further downside in the US dollar.
The USD high as other economies are more affected by the coronavirus
A sudden outbreak of the coronavirus in Italy has seen stocks in Milan tank over 4% on Monday amid fears it will do to the Italian economy. So while the US is being negatively affected, traders are reaching the conclusion that other economies, including Italy are likely to have it worse. This means the dollar is higher again on Monday, acting again as a haven asset.
The next indication for the US economy will be the Chicago Fed National Activity Index, but the data is for January so may not receive a strong reaction from markets. Signs are that supply chains and other industries like tourism involving China only started to be pull on the economy in February.