Federal Finance Minister Bill Morneau taxed his brain and concluded that the coronavirus would have a significant impact on the Canadian economy. He told a Calgary audience, “I do want to acknowledge that the virus is undoubtedly going to have an economic impact.” He went on to say “We know the impact is real. It’s going to be felt across the country but perhaps even more so here in the oil and gas sector.”
Cynics might suggest that the Finance Minister was attempting to use the tragedy of the coronavirus outbreak to mask his government’s incompetence around the energy file. He bragged about the progress on the Trans-Mountain pipeline and how it is creating benefits for indigenous peoples. He didn’t say anything about the report that the cost to complete the project jumped 68% to $12.6 billion.
The Canadian dollar continued to ignore domestic developments and tracked broad U.S. dollar sentiment. That sentiment shifted slightly with the greenback giving back a small part of yesterday’s gains. Asia equity indexes closed on a mixed note. The Hong Kong and Shanghai indexes rose, while Japanese markets were shuttered for holidays. European equity indexes made new record highs and U.S. futures suggest another positive opening for Wall Street.
The only concern is how U.S. Federal Reserve Chairman Jerome Powell will answer coronavirus questions during his congressional testimony today and tomorrow. The text of the Fed’s Monetary Policy Report was released earlier. It echoed the outlook from the December and January Federal Open Market Committee meetings.
The U.S. dollar opened on a mixed note this morning, after closing with gains across the board yesterday.
EUR/USD is suffering in early Toronto trading and is at its overnight low of 1.0906. Political turmoil inside Germany’s ruling CDU party, accelerated losses below support at 1.0940 on Monday, and the single currency has yet to recover. Bearish EUR/USD sentiment from U.S. economic outperformance compared to the eurozone fueled earlier selling and that sentiment worsened as President Trump is talking about eurozone trade.
There were a lot of economic reports released in the U.K. today. Q4 Gross Domestic Product was unchanged, the trade surplus widened, but Industrial and Manufacturing production slumped. The data sparked a mild bout of profit-taking and GBP/USD climbed to $1.2940 from $1.2896
AUD/USD and NZD/USD opened in Toronto with small gains. NZD/USD traders are biding their time until the Reserve Bank of New Zealand monetary policy statement is released tomorrow. Expectations are for unchanged rates and a steady policy outlook.
The U.S. and Canadian economic calendars are empty today, leaving Canadian dollar direction at the mercy of broad U.S. dollar moves.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians