The Canadian dollar traded erratically this week. USD/CAD bottomed out at $1.2500 on Easter Monday, as FX moves were exaggerated due to poor market liquidity. Prices climbed steadily until meeting a wall of resistance at $1.2650 on Wednesday and then dropped to $1.2555 yesterday. The overnight session wasn’t any different with USD/CAD bouncing in a $1.2557-$1.2609 range.
There are a couple of reasons for the volatility. Weaker than expected U.S. jobless claims data yesterday and softer Treasury yields drove the greenback lower against the majors and the Canadian dollar went along for the ride. Then profit-taking into the weekend gave the greenback a lift.
Canada is expected to have added 100,000 jobs in March. Many analysts expect the result to surpass the estimates, with some forecasting a gain of 150,000. Last week, the U.S. non-farm payrolls report was well above forecasts and many believe Canada will have a similar result.
If so, the initial reaction will be to buy Canadian dollars. That may be a short-lived move due to the latest coronavirus lockdown restrictions in Ontario and in Montreal, which will put a dent in domestic economic growth expectations and hiring.
U.S. Federal Reserve Chair Jerome Powell’s remarks at the International Monetary Fund meeting didn’t offer anything new. He repeated that U.S. rates are staying low until the FOMC is satisfied that they have achieved their dual mandate of maximum employment and sustainable inflation in the 2.0%.
EUR/USD retreated from $1.1919 in Asia then consolidated in Europe in a $1.1885-$1.1897 band. Weak German trade and Industrial Production data weighed on the currency, leading ING analysts to speculate about a contraction in the first quarter.
GBP/USD dropped from $1.3749 to $1.3671 but is clawing back some of those losses in early NY trading, reaching $1.3722. Some analysts suggest part of the drop was due to a slide in Gilt yields. Nevertheless, GBP/USD is ending the week as the worst-performing major G-10 currency. The uptrend from last May is intact while prices are above $1.3620.
USD/JPY recovered all of yesterday’s losses. Prices dropped from 109.75 to 109.00, then rallied overnight and are trading at 109.70 in New York. Part of the rally is because U.S. 10-year Treasury yields appear to have found support in the 1.63% area.
AUD/USD clawed back some of yesterday’s losses, rising from $0.7590 to $0.7660 before dipping to $0.7630 in New York trading. Prices were underpinned by better than expected Chinese Producer Price Index data and higher inflation readings. The Reserve Bank of Australia Financial Stability Review did not cause any concern, leaving AUD/USD and NZD/USD to track broad U.S. dollar moves.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
