USD/CAD: Canada Manufacturing PMI Sees Surprise Rebound

The US dollar is higher against the Canadian dollar on Tuesday morning as the greenback rebounds from a sharp decline against the Loonie yesterday. Markets are awaiting a communique from the G7 group of nations about a possible coordinated response to the coronavirus. There are reports it could underwhelm.

USD/CAD was up by 39 pips (+0.29%) to 1.3358 with a daily range of 1.3318 to 1.3369 as of 9.30am GMT. USD/CAD dropped -0.60% on Monday, erasing the prior two day’s gains but stabilised above 1.33.

CAD is tracking the price of oil

As well as the possibility of a coordinated fiscal and monetary response to the coronavirus from the G7, which includes Canada. French finance minister Le Maire said on Monday that G7 finance ministers and central bank governors would hold a teleconference call about how to handle the coronavirus outbreak. Coordinated action from the G7 were it to occur, would be good for the global growth outlook and reduce the need for the US dollar as a haven.

The OPEC+ meeting is still set to go ahead as planned on March 5-6.

There was good news from the Canadian economy on Monday. The Canada February manufacturing PMI rose to 51.8 versus 50.6 prior. Of course, factory output might deteriorate again in March but it would appear that the reduction in trade tensions is still having a net positive effect on Canadian manufacturing, despite the dampening effect of the coronavirus outbreak.

The US dollar

Haven currencies like the dollar caught a bid when Reuters reported that a communique from the G7 after the conference call would probably not indicate any kind of coordinated fiscal stimulus or interest rate cuts.

The US dollar is firming against the Loonie but more mixed against other currencies as market sentiment improves. Softer economic data and more calls from US President Trump to reduce US interest rates are weighing on the dollar while some softness in the euro and is a positive. The US February ISM manufacturing showed US factory output still just about expanding at 50.1% versus the 50.5% prior.

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