Tuesday, August 18, 2020

Canadian Dollar Extends Six-Week Win Streak

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News shaping
the markets today

     

What’s happening: The Canadian dollar gained versus the greenback on Monday, nearing its highest level in seven months.

What happened: The US dollar remained under pressure due to the lack of progress in talks between the Congress and the White House around a new covid-19 rescue package.

The loonie extended its six-week rally supported by Canada’s release of upbeat economic data indicating a good pace of recovery in the country’s economy.

Why it matters: The Canadian Real Estate Association reported that the country’s home sales hit a record high in July, surging 26% month-over-month. Sales in July also climbed 30.5% versus the same month last year.

Th loonie closed last week on a positive note for the currency, backed by manufacturing sales jumping 20.7% in June. The recorded growth was higher than markets were expecting, which helped the Canadian dollar delivery a gain of 1%, rising for the sixth straight week.

The Canada’s currency was also bolstered by a rise in the price of oil, which is one of the country’s major exports. US crude oil gained 2.1% to settle at $42.89 per barrel on Monday, with China planning to increase crude imports from the US, countering the so-far escalating tensions between the two countries.

On the other hand, the US dollar continued to weaken, taking the dollar index, which measures the greenback’s performance against a basket of major currencies, lower on Monday, as there were no signs of progress in the negotiations over a fresh stimulus for the economy.

Canada’s government bond yields also declined on Monday, with the 10-year yield dropping 3.1 basis points to 0.582%, down from the two-month high of 0.642% set last Thursday.

The loonie traded between 1.3192 and 1.3262 against the US dollar on Monday, after hitting its highest intraday level since January 30 of 1.3188 last Thursday.

What to watch: With no major data out from Canada until Wednesday, the USD/CAD pair is expected to remain range bound till mid-week. Canada will be releasing reports on inflation rate, wholesale sales, ADP employment and retail sales during the later part of the week.

Investors will also keep an eye on the FOMC (Federal Open Market Committee) minutes, which are scheduled to be released on Wednesday.

The Markets Today

     

European stocks will be in focus today, after rising in the previous session.

Context: European stocks closed Monday’s volatile session on a positive note, with investors keeping a close eye on geopolitical tensions and a rise in coronavirus cases globally.

Details: Rising tensions between the US and China continued to keep investors on the sidelines, with US President Donald Trump ordering China’s ByteDance on Friday to either sell or spin off its TikTok business in the country within 90 days. The trade deal review between the two countries, which was planned for Saturday, has been postponed indefinitely.

The modest gains recorded by European indices on Monday may have been due to investors looking for attractive entry points, as stocks in the regions have been brutally battered. European indices declined on Friday, led by weakness in travel stocks, after the UK added more countries to its quarantine list, with France and Spain experiencing another rise in covid-19 cases.

The pan-European Stoxx 600 index inched up 0.3% on Monday, after remaining flat for most of the session. Basic resources stocks gained around 1.5% in the previous session, while travel stocks fell another 1.5%, extending Friday’s losses.

No major companies released earnings on Monday. HelloFresh’s shares gained around 5% on Monday, while shares of cinema chain Cineworld fell about 8%.

The French CAC 40 and German DAX 30 index gained around 0.2% each, while UK’s FTSE 100 climbed 0.6% on Monday.

What to watch: With the Eurozone not scheduled to release any major economic data today, markets will be on the lookout for news related to the US government’s new covid-19 package.

Investors will continue to monitor the covid-19 figures, with total cases exceeding 21.8 million globally.

Other Markets: US indices trading closed mixed on Monday, with the S&P 500 and Nasdaq 100 up 0.27% and 1%, respectively, while the Dow Jones index down by 0.31%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Russian producer prices as well as the US housing starts, building permits, Redbook index and API crude oil stockpiles.