The US dollar is lower against the Canadian dollar on Monday morning as part of a wider risk-on move that has seen Asian and European shares rise and havens like the dollar fall. Investors are trying to establish if markets have already priced in the worst-case scenario for the coronavirus.
USD/CAD was down by 73 pips (-0.56%) to 1.3322 with a daily range of 1.3315 to 1.3440 as of 9.30am GMT. The currency pair ended Friday well off its daily highs and the decline today has erased gains made on Thursday and Friday. Last week the USD/CAD exchange rate closed the week +1.32% even when including the late reversal on Friday.
A rapid oil price decline weighed heavily on CAD
It was a rough week at the office for the Canadian dollar last week, but things are looking distinctly better at the start of this one. A rapid decline in the price of oil weighed heavily on the Loonie thanks to Canada’s large oil exports. Those exports stand to be worth substantially less after the -16% weekly decline the price of WTI crude oil futures experienced last week. Like shares on Wall Street, the price of oil rebounded off its weekly lows on Friday and as of Monday the price of WTI crude oil is another 2.5% higher.
Rumours of a 1M barrel per day cut to OPEC+ output led by Saudi Arabia helped ease the strain in oil markets. OPEC+ is set to hold its emergency meeting on March 11 in Vienna Austria to agree whether output should indeed be cut the amount rumoured.
The US dollar
A rare unplanned statement released by the US Federal Reserve on Friday that said the US central bank would “act as appropriate” to contain any economic fallout from the coronavirus has helped improve the mood in markets. Earlier comments from the Fed as well as the decision by the Bank of Korea to leave rates on hold, despite South Korea having the highest number of coronavirus cases outside of China had given investors the impression that central banks were not ready to act. Now analysts at Goldman Sachs expect a US rate cut, perhaps before March.