The Canadian dollar is bouncing around the U.S. 80-cent level, but the rally is struggling to maintain momentum. One of the issues may be due to rapidly rising COVID-19 cases in Ontario and many other provinces. The federal government’s failure to secure an adequate number of vaccines in a timely manner and new COVID-19 variants could lead to 18,000 new infections per day by the end of May, and hospitals are already overwhelmed.
On the plus side, a surge in China Gross Domestic Product to 18.3% in Q1 underscores the potential economic boom when the pandemic is contained. The news drove crude oil prices higher. West Texas Intermediate (WTI) jumped to $63.85/b from a low of $58.77 on Monday in a move fueled by shrinking U.S. crude inventories and hopes for a jump in global crude demand.
The U.S. dollar is closing the week with losses against the G-10 majors, led by a 1.58% gain in the New Zealand dollar. The U.S. dollar is undermined by recent U.S. data, which helped improve the global growth outlook. Thursday, U.S. Retail Sales and weekly jobless claims were better than expected, which sparked a fresh wave of positive risk sentiment.
EUR/USD is grinding higher slowly and somewhat reluctantly, rising from $1.1952 to $1.1994 overnight. In part due to narrowing EU/US interest rate differentials. The U.S. 10-year yield dropped to 1 .53% from 1.685% this week, and that move helped lift EUR/USD from $1.1877 Monday to $1.1993 yesterday. Eurozone economic data was ignored. The trade surplus narrowed, and the final reading for March inflation was unchanged at 1.3% y/y. The intraday technicals are bullish above $1.1950.
EUR/CAD climbed steadily in April, but it is a counter-trend rally in the context of the slide from January. Prices may struggle to overcome resistance in the $1.5050 area if crude prices continue to climb, and European Central Bank officials continue to emphasize the need for monetary stimulus.
GBP/USD languished in a narrow $1.3766-$1.3808 range and is sitting just above the low. Prices are supported by expected robust growth as the reopening of the economy gathers steam. The intraday technicals are bullish above 1.3730.
NZDUSD is finishing the week as the best performing G-10 currency, while the Canadian dollar is the worst.
Housing Starts for Canada and the U.S. are on tap today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians