News & analysis


The loonie has joined most of the G10 in sinking against the dollar this morning, as it compounds losses of 0.34% in yesterday’s session. The Canadian dollar is struggling as it etches closer to multi-year highs posted back in mid-March, especially with lockdown measures reimposed across major provinces for the coming month. A slow vaccination programme is also adding risks to the positive economic outlook, as mass reopening remains in the distant future at current vaccination rates. USDCAD traders will join most other market participants today in scrutinising the latest FOMC minutes. However, the minutes will be viewed from a Canadian perspective as relative to expectations of the Bank of Canada announcing the tapering of its QE programme this month. On the data front, international merchandise trade data for February and the Ivey PMI for March are released at 13:30 BST and 15:00 BST respectively.


The dollar index hit a two-week low in yesterday’s trading session and briefly dipped further this morning, slipping from a five-week high earlier in March. The index rose by 2.6% in Q1, which is the largest quarterly rise in three years but elevated risk appetite caused the dollar to drop for four days straight ahead of the release of the FOMC minutes tonight. However, the dollar’s decline has stabilised somewhat as the morning progresses, with the market’s mood further lifted by the announcement of President Joe Biden who stated he wants all American adults to be eligible for a Covid-19 vaccine by April 19, two weeks earlier than his previous goal, while California Governor Gavin Newsom announced to fully reopen on June 15 if the state meets specific criteria. With today’s calendar being virtually blank, markets will have all their eyes on the FOMC minutes which are scheduled for release at 19:00 BST. Given the high degree of divergence between market pricing in rate hikes compared to the FOMC projections, the minutes will be scrutinised for further clarity on the Fed’s reaction function.


The euro was among the best performers in the G10 space yesterday, trading in the green across the entire board with the exception of the Swedish krone. Sentiment in the eurozone is optimistic despite the current lockdown situation and elevated virus numbers as markets arguably choose to look past short-term risks and trust that the vaccination roll-out will pick up speed in Q2, especially after the EU brought its vaccination target forward yesterday. Previously, the EU wanted to have everyone over 70 vaccinated by the end of August, but this has now been moved forward to June which is aiding risk sentiment. The European Medicines Agency wll hold a briefing today at 15:00 BST on the use of AstraZeneca vaccines among young people and any relations to increased chances of blood clots. Should they provide negative advice for the vaccine to be given to younger people, this could weigh on market mood and the euro in turn as most of the euro’s elevation flows from vaccine expectations. Meanwhile, German Chancellor Angela Merkel backed the call from the chairman of Merkel’s CDU party for stricter short-term lockdown measures to contain the further spread of the outbreak. A hard two- to three-week lockdown is needed to get rates in Germany under control, according to him. Beyond the EMA briefing on the use of Astra vaccines this afternoon, euro traders will watch developments in general risk sentiment today.


Sterling sat at the bottom of the G10 currency board yesterday and its losses were only beaten by the Russian ruble out of the expanded majors. Falling 0.57% over the course of the day, the pound suffered from uncertainty over the safety of the AstraZeneca vaccine, which has been linked to blood clots in younger adults. Such a risk derails the government’s vaccination programme somewhat, despite government officials stressing the minimal risks of those vaccines and to take them should they be offered. While sterling’s losses seemed large, they were in fact only as sizable as the pound’s rally on Monday. Today, however, the pound continues to trade heavily despite mixed price action from the dollar as the Medicine and Healthcare products Regulatory Agency continues to investigate the risks surrounding the AstraZeneca jab. Negative sentiment is being offset somewhat by the news that the UK will begin to roll out the Moderna vaccine today, two weeks ahead of schedule. While the news is doing little to stop the pound trading in the red against both USD and EUR, it is likely limiting losses this morning.



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