The Canadian dollar is trading lower versus the USD on the first trading session of the week. The volatility felt in the markets since the exit polls started pointing to a Leave win on the EU UK referendum continues as three out of the three main attractions to the European Central Bank (ECB) Forum in Portugal have pulled out. Bank of England (BoE) Governor Mark Carney, European Central Bank (ECB) Chief Mario Drahi and U.S. Federal Reserve Janet Yellen had to pull out of their scheduled appearance in what was a heavily anticipated event as the market is looking for guidance from central bankers. Fed Chair Yellen is in Europe to attend the annual meeting of the Bank of International Settlements but will return after the meeting, leaving no time to participate in the ECB forum as per the Fed’s spokesman said over the weekend.
Global stock markets and most currencies continue adrift as investors flock to safe-havens: the USD, the JPY, CHF and gold. The losers have been emerging markets, the pound and commodities as risk aversion grips the market as the fate of the E.U. is uncertain. The rise of the greenback and the drop of commodities, energy in particular, have been negative for the CAD which has lost more than 2 percent in the last 5 days. The pair has broken through the 1.31 price level and the Canadian economic calendar will offer no counter arguments for the softness of the currency.
Ratings agency Standard and Poor’s cut England’s credit worthiness from AAA to AA following the result of the referendum vote. The negative outlook is based on the continuing political infighting that would not lead to a speedy resolution to the predicament the U.K. finds itself in. The pound has fallen as much as 14 percent from a 52 week high, with 10 percent of that coming after the referendum results started trickling in.
The USD/CAD has gained 0.741 percent in the last 24 hours. The pair is trading at 1.3097 after the CAD has depreciated on Brexit anxiety. The USD has proven to be a safe haven for investors after the UK EU referendum results showed a surprising win by the Leave camp. This week will be a difficult one to maneuver for traders as there will be little economic data to guide markets, leaving central bank rhetoric and politician’s statements from around the globe to shape price action after the historic decision by British voters.
West Texas tumbled 2.79 percent in the last 24 hours. The price of energy is trading at $45.71. Risk aversion has boosted the USD versus riskier assets, which includes commodities. Crude prices had dropped close to 7 percent since the Brexit decision was imminent. Oil prices will be following the news and reaction from investors who for now have crowded less risky assets on what was a improbable event, but one there were emergency plans prepared for nevertheless. The preparation did not prevent the rapid moves in the market, but it did allow the markets to price the information on a timelier basis than with other events. The Swiss National Bank (SNB) shock decision is the perfect counterpoint to the market reaction to Brexit. Oversupply and EU membership anxiety will keep putting downward pressure on crude prices.
American dollar strength and energy weakness will define the CAD this week ahead of the Canada day holiday on Friday. Next week the symbiotic relationship with the U.S. will be at the forefront as U.S. employment data and the minutes of the June Federal Open Market Committee (FOMC) meeting will be published which could boost the USD, but also appreciated the CAD versus other pairs.
Market events to watch this week:
Tuesday, June 28
European Council Summit to Discuss Brexit
8:30am USD Final GDP q/q
10:00am USD CB Consumer Confidence
Wednesday, June 29
10:30am USD Crude Oil Inventories
Thursday, June 30
4:30am GBP Current Account
8:30am CAD GDP m/m
8:30am USD Unemployment Claims
9:00pm CNY Manufacturing PMI
9:45pm CNY Caixin Manufacturing PMI
Friday, July 1
4:30am GBP Manufacturing PMI
10:00am USD ISM Manufacturing PMI
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar