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The Canadian dollar spent most of the week in the red and nearly closed as the biggest loser on weak oil prices, unemployment fears, and a surprise rate cut from the Bank of Canada.
Canadian Headlines and Economic data
Monday:
- Canadian wholesale sales increased for a second consecutive month, up 1.8% to $65.2B in January.
- Early drop lower for the Loonie and oil (as seen in the chart below) on Monday, likely due to the continued negative risk sentiment fueled by the ongoing coronavirus pandemic and likely economic damage to the global economy. It’s also likely the the failure of the stimulus bill to pass the U.S. Senate added to market fears.
- It was a quick turn around in sentiment, though, during the U.S. session towards positive, likely sparked by a pledge from the Federal Reserve to support the markets with no limits, adding to the news of major stimulus moves from the Reserve Bank of New Zealand and Reserve Bank of Australia announced during the Asia session. Oil prices were able to recover, the but the Loonie remained under pressure going into Tuesday.
Tuesday:
- Jobless claims soar to nearly 1 million in Canada – this speculation and unofficial numbers on unemployment claims was likely the reason the Loonie was not able to rally until Wednesday with other risk assets as sentiment continued to improve on more news of massive stimulus measures coming, (e.g., ECB Intends to Be Major Buyer in Commercial Player Market, Canada doubles value of coronavirus stimulus package, New Zealand announces mortgage holiday, business finance support to cushion virus impact, etc.)
Wednesday:
Thursday:
- The Canadian dollar was unable once again to rally with the prevailing positive global risk sentiment, likely due to falling oil prices on the session as the sinking demand for oil outweighed stimulus hopes.
Friday:
- Risk sentiment soured a bit on Friday, possibly on traders fearing that the U.S. stimulus bill may hit a snag and on the continued acceleration of cases around the globe.
- Government boosts wage subsidy to 75% for small, medium businesses to avoid layoffs during COVID-19 crisis
- No hope for a Loonie rally on Friday after the Bank of Canada makes another emergency cut to interest rate to 0.25% and oil prices continued to drop as the risk of the world being flooded with oil continues to rise.