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Market Wire
Canadian Dollar Steadies After Wednesday Plummet

Matt Eidinger January 23, 2020

The US/Canadian dollar spot rate is stable this morning at a one-month high as forex markets digest today’s reading on weekly claims for unemployment insurance in the United States.

The loonie fell off a cliff yesterday morning as a result of the dovish tone struck by the Bank of Canada.

The central bank, which has maintained the highest interest rate among developed nations and not made any attempt to be more accommodative, pivoted yesterday, issuing a policy statement that indicated the Bank may consider cutting rates if warranted by economic developments.

At a subsequent news conference, Bank of Canada Governor Stephen Poloz said, “I’m not saying that the door is not open to an interest rate cut, obviously it is…”.

According to this morning’s release from the US Department of Labor (DOL), weekly jobless claims rose slightly to 211,000 during the week ending January 18. The increase in weekly filings is mostly due to increased layoffs across industries and spread out across the states of California, Texas and Missouri.

The more reliable four-week moving average fell to 213,250 during the same time period and continuing jobless claims for the week ending January 11 moved down to 1,731,000.

Earlier this morning, the European Central Bank (ECB) maintained its refinancing operations rate, marginal lending facility rate and deposit facility rate at 0%, 0.25% and -0.5%, respectively. The ECB also launched a review of its monetary policy strategy with further details coming this afternoon.

The World Economic Forum, being held in Davos, Switzerland, this week, has also commanded some attention from financial markets. Although a large focus at this year’s conference is sustainability, President Trump did not hesitate to lambast China as being unchecked and engaging in “predatory [trade] practices” before he assumed office.

The world’s two economic superpowers previously signed a “phase 1” trade agreement in an effort to halt the trade conflict that has engulfed the global economy for the past two years.

The thawing of relations between the US and China on the trade front has prompted the US dollar to weaken modestly against most major currency pairs. However, financial markets should keep in mind that the phase one trade deal is only the beginning of a much larger effort to resolve a much larger Sino-American conflict.

It is a good first step, but as we move further into 2020, financial markets will tend to forget the short-term impact of the phase 1 signing. Instead, it will be more important that the two superpowers follow through with their commitments to each other.

Matthew Eidinger
Fintech Specialist, Dealing Operations

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