Canadian Dollar Talking Points:
- Canadian Employment Data beat expectations
- The Lonnie strengthened briefly on the data
- Coronavirus fears weigh on CAD and oil prices
The Canadian Dollar briefly shot higher on the release of jobs data this morning. Canada posted a net change in employment of 34.5k jobs, beating expectations of 17.5k. The Lonnie initially moved higher on the report before returning to post-release levels. Risk-off themes in the market, stemming from coronavirus fears, have affected the CAD negatively since the virus first emerged. Global growth fears, rekindled by the coronavirus, have dragged on crude oil prices and as a result, the Canadian Dollar.
CAD Net Change in Employment
The interest rate sensitive pair initially saw a jump as the Canadian jobs report crossed the wires, but quickly pushed back down to pre-release levels near the 82.509 mark. Risk-off sentiment recently injected into markets by coronavirus fears boosted risk-off currencies. In particular, the safe-haven yen saw an influx of strength in the second half of January as traders sought out safety amid the panic surrounding the virus.
CADJPY (Daily Price Chart)
Now trading at its lowest mark since January 30th, GBPCAD is falling further after the cross gyrated on the job’s figures. Adding downward pressure on the pair were comments from US Vice President Pence on Huawei, casting doubt over a US-UK trade deal. Pence stated, ‘we’ll see’ concerning the UK’s recent decision to allow Huawei to take part in the countries 5G buildup.
If tensions build further between the US and UK regarding the Huawei decision, downward pressure on GBPCAD is likely. Furthermore, a pullback of fears over the coronavirus would likely see a rebound to depressed oil prices, further strengthening the Lonnie in relation to the Sterling.
GBPCAD (1-Hour Price Chart)
Facing the risk-sensitive Australian Dollar, AUDCAD appears set to retest a multi-month low. The Aussie has faced considerable headwinds in recent months stemming from global growth slowdown fears to the more recent coronavirus scare. Now, set near its multi-month low, the cross looks set to challenge recent lows, which double as a price floor set through the latter half of 2019.
A break under this price floor would send AUDCAD down to challenge its 2010 low of 0.7159. Should fears lift over coronavirus and commodity prices rebound, the pair would likely face conflicting fundamental drivers. However, the recent trend sets the stage for a continued push lower. Rebounding oil prices would likely strengthen the Canadian Dollar, while fears over global growth would likely remain until the full impact of the coronavirus is known.
AUDCAD (Daily Price Chart)
Canadian Dollar Index:
The impact of the coronavirus on the Canadian Dollar is well illustrated when viewing the timeline of the virus and its impact on oil. The virus rekindled lingering global growth fears in the market, sending oil prices lower along with several other key commodities. As a result, the oil-linked Lonnie suffered along with crude oil.
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Canadian Dollar Index (Daily Price Chart)
–Written by Thomas Westwater, Intern Analyst for DailyFX.com
Contact and follow Thomas on Twitter @FxWestwater