The Canadian dollar continues to dwindle as a result of increased fears surrounding the coronavirus. After the US Centers for Disease Control and Prevention (CDC) issued a press release which warned of the coronavirus’ potential to cause a pandemic, the panic started on Wall Street. As a result, the tone was set for equity and Foreign Exchange markets overnight which kept the Canadian dollar on the back foot going into the early hours yesterday. The Dow Jones Industrial Average (DJIA) dropped 3.15% as the S&P 500 lost 3.03% whilst the NASDAQ retreated 2.77% by the time that the US stock markets closed yesterday.
Coronavirus continues to threaten global economy
The South China Morning Post reported yesterday that there were 81,184 confirmed cases of the COVID-19 coronavirus worldwide, with South Korea, the Diamond Princess cruise ship and Italy with the highest number of cases outside of China. Meanwhile, markets are pricing in two US Federal Reserve (Fed) rate cuts in 2020, which is a significant change from January when no cuts were expected. Investors expect the Fed to react to counter the risk of an economic downturn because of the coronavirus. However, yesterday the Vice Chair Richard Clarida dampened spirits by noting that it is still too soon to speculate about the size of the effects of the coronavirus.
Risk-sensitive currencies like CAD continue to remain capped
The risk-sensitive Canadian dollar continues to fall as a result of the coronavirus. With fears spiked, investors have once again fled to safe haven currencies like the USD whilst waiting for a drop in the number of confirmed cases. However, this looks unlikely for the foreseeable future as cases across the globe continue crop up. Yesterday saw little economic data for the Canadian dollar which meant that the currency was driven by developments on the coronavirus, and with only negative news filtering out of media outlets about the disease, the currency remains capped..
Looking ahead, the Current Account data for Q4 in 2019 is expected later today at 13:30, whilst the more important Gross Domestic Product Annualised figures for Q4 in 2019 will be due on Friday at 13:30. CAD investors will be hoping to see some upticks in these data releases to try to help the struggling risk-sensitive currency as it attempts to break free from the clutches of the ever-spreading coronavirus.
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