There were no major catalysts from Canada this week, so its relative underperformance was mainly due to broad risk sentiment and counter currency flow.
By the end of the week, the Loonie was only able to outperform the safe haven yen and Swiss franc, while underperforming against the other majors.
Canadian Headlines and Economic data
The big market driver of the week came on Monday from Pfizer / BioNTech, announcing that their COVID vaccine is more than 90% effective. This sparked a big risk-on move across the financial markets as traders priced in the odds of an economic recovery coming sooner rather than later. This sentiment did fade by the Monday U.S. session, but lingered on to influence the markets through most of the week. The Canadian dollar was a big gainer on the news, as well as oil as expectations of oil demand rising was priced in as well.
Trudeau says Canada will not bow to China’s ‘coercive diplomacy’ – China is pressuring Canada over the case of Huawei Chief Financial Officer Meng Wanzhou who was arrested in Canada on a U.S. warrant almost two years ago.
The Canadian dollar and oil shifted lower during the Wednesday and Thursday session, likely a move supported by a broad shift in risk sentiment towards negative. It’s likely traders were coming off vaccine news highs and focusing on the rising COVID cases in Europe and the U.S., as well as the falling odds of a new stimulus bill coming from the U.S. government.
It’s also likely that OPEC’s cut to its 2020 oil demand forecast was a factor in pressuring oil prices and the Loonie as well.
- “Canada is likely to exit the pandemic with a lower profile for potential output, which will significantly diminish its ability to generate goods, services and incomes on a sustainable basis, Wilkins said.”
- “Wilkins noted that immigration has fueled Canada’s economic growth in recent years and said higher levels would boost potential growth over time.”
Oil Pares Weekly Gain as Viral Surge Overshadows Vaccine Promise -Futures fell 2.4% in New York on Friday