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  • USD/CAD holding up despite lower DXY, commodity currencies son backfoot. 
  •  WTI ended Friday up 4.5% at $32.93 but was down 7% in Asia and risk-off markets.
  • Central banks and governments in the limelight, now waiting on Canada’s announcement.  

USD/CAD has been holding the bid despite a surprise emergency cut from the Fed and a weaker dollar at the start of this week. At the time of writing, USD/CAD is trading +0.17% higher having travelled between a low of 1.3728 and a high of 1.3888.

We are now awaiting an announcement from Canada regarding a response to the COVID-19, (scheduled for later today), although, on Friday, the Bank of Canada cut another 50bps in an inter-meeting move, taking their benchmark rate to 0.75% (from 1.75% 10 days ago). Then, on Sunday, in an emergency move ahead of the Asian open, the FOMC today announced a comprehensive set of measures to support the economy and maintain the flow of credit. The Fed Funds was reduced 100bp to 0%-0.25%, the Fed cut the primary credit rate on the discount window 150bp to 0.25% and QE was announced. The Fed will expand its holdings of Treasury securities by at least $500bn over coming months and its holdings of agency mortgage-backed securities by at least $200bn.

Also, the BoC, BoJ, ECB, SNB and Fed will begin offering US dollars with an 84-day maturity in weekly liquidity operations in each centre in measures designed to offset a possible seizing up of credit flow to the economy. 

“Returning rates to zero and at least $700bn in QE in coming months should weigh on the USD vs majors as US bond yields across the curve head toward zero, if not below,” analysts at Westpac argued.

“The strong prospect of easing measures elsewhere will be an offsetting factor for the USD, though only partially, since the Fed has notably more policy space than others. EM and commodity currencies are another story, the USD likely continue to outperform as global growth comes to a grinding halt and amid ongoing extreme market volatility.”


In commodities, the energy sector endured the most damage in recent times, ending the week down 19.5% as crude oil prices collapsed, weighing on the loonie. However, WTI ended Friday up 4.5% as governments launched stimulus measures to offset the growing economic impact of COVID-19. However, the bid was shortlived in Asia’s risk-off session today. 

“While hopes of stimulus and recovering risk markets on the day are helping crude, the underlying situation remains precarious. Mounting travel restrictions deliver a direct and immediate hit to demand, which could very well be negative in y/y terms, while increased supply from Saudi, Russia and the UAE is on the cards amid a price war for the foreseeable future. The combination of both the demand and supply shock suggest massive surpluses and swelling inventories are on the horizon.”

USD/CAD levels





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