The Loonie finished the week as the biggest loser among the major currencies. With no major catalysts directly from Canada, it’s likely global risk sentiment, tariff threats and falling oil prices were the largest contributors to the bears taking control of the Canadian dollar.
Canadian Headlines and Economic data
There doesn’t seem to be a direct catalyst for the Loonie’s bullish performance against the safe havens and bearish move against the rest. The move started in the Asia session where risk aversion sentiment was more prominent, later flipping to positive as U.S. equities were driven higher by the tech sector.
U.S. Poised to Slap 10% Tariff Again on Aluminum From Canada – this looks like the catalyst for the broad turn lower in the Canadian dollar against the major currencies. Oil prices also topped out and turned lower for the week on the session, likely on speculation that the upcoming oil inventories data would disappoint and/or rising coronavirus cases may sap demand once again.
Traders ran for safety during the U.S. session, prompting the divergence in Loonie price action (higher against the “risk” currencies/lower against the “safe havens”). News of rising covid cases, negative global economic outlook, and geopolitical tensions (U.S. is considering $3.1 billion in new tariffs on products from France, Germany, Spain and the UK) were likely contributors to the volatility.
Broad risk sentiment went positive during the U.S. session after an easing of U.S. financial regulations was announced (Bank stocks reverse higher as regulators ease Volcker Rule), prompting another mixed move in the Loonie against the majors.
No major catalysts from Canada, so the broad move lower in the Canadian dollar on the session was likely due to continued focus and fears of rising coronavirus cases and U.S. states moving back into lockdown mode, taking oil price lower along with the Loonie.