The Loonie was a net loser this week thanks to weak Canadian economic updates early in the week and a shift in global risk sentiment back to negative at the end of the trading week.
Canadian Headlines and Economic data
Net positive start to the week for the Loonie, likely on positive global risk sentiment. Traders were starting the week on good vibes on a mix of stories including a change of heart on face masks by U.S. President Trump, optimism of a EU Recovery fund deal, and another positive COVID-19 vaccine update, this time from the joint project between Oxford and AstraZeneca.
The Canadian economic updates above were weaker-than-expectations and correlate with the Loonie’s turn lower against most of the majors. Risk sentiment was also on the upswing and likely why we saw the Loonie fall against the other comdolls, while the EU recovery fund deal was likely the driver for Loonie’s weakness against the euro and Swiss franc on the session.
These were better-than-expected updates, which likely is the driver for the Loonie’s bottoming out pattern during the U.S. trading session, especially as risk sentiment soured a bit as traders began to focus on rising tensions between U.S. and China (U.S. charges two Chinese nationals in coronavirus vaccine hacking scheme, U.S. gives China 72 hours to shut Houston consulate)
No updates from Canada meant that the Loonie’s price action would be driven by risk sentiment vibes, and likely the reason why we saw mixed price action during the U.S. session as sentiment soured, this time on signs of a weakening rebound of the U.S. jobs sector and rising U.S.-China tension. We also saw rising COVID-19 worries and U.S. big tech sector weakness to likely be catalysts for risk aversion.
Loonie continued to see pressure into the weekend and with no drivers from Canada, broad risk sentiment was likely the main driver. U.S.-China tensions were once again a focus, this time after China ordered the closure of a U.S. consulate in Chengdu and US Secretary of State Mike Pompeo urged China’s citizens to help ‘change the behaviour’ of their government.