The US dollar is higher against the Canadian dollar on Friday morning after Wall Street experienced its biggest one-day price fall since the 2008 financial crisis. Panic about the coronavirus is intensifying, causing investors to sell shares and flock to haven assets including the US dollar.
USD/CAD was higher by 60 pips (+0.44%) to 1.3447 with a daily range of 1.3376 to 1.3449 as of 9.30am GMT. The currency pair is breaking out of its multi-month 1.30-1.33 price range into what could be a new uptrend. Weekly gains stand at +1.69%.
The CAD down as oil price falls by 12% in four days
The Canadian dollar has slumped for the last three days to its lowest levels since early June last year and an eight-month low. The price of oil has fallen by 12% in four days, well into a technical correction and on its way to a bear market decline of 20%. Canada’s economic reliance on its oil exports combined with the safety appeal of the dollar when markets are being tested are forcing traders to sell out of the Loonie.
Reports that Saudi Arabia supposedly pushing for a deep 1M barrels per day cut to OPEC+ oil production has done little to support the price oil. Brent crude oil has reached $50 per barrel to plum a 2-year low. Not only does the oil industry prefer higher prices, it also needs stable prices to properly invest in future projects. The instability of oil prices will likely be deterring a lot of business being done in Canada. Once this deterred business shows up in economic statistics, the Bank of Canada will be more likely to lower interest rates.
A report that California is monitoring thousands of potential cases of the coronavirus is pushing US equity futures lower on Friday, setting up another crushing drop when Wall Street opens. President Donald Trump’s comment from Thursday that “We’ve done a great job on coronavirus” is getting widely ridiculed. There is a lot to be said for optimism, but many would argue this is a time for realism. Perhaps US authorities have done a great job, but investors aren’t hanging around to find out.