For the last four weeks, the USD has been declining (and Canadian dollar rising) on the assumption that vaccination programs would bring the pandemic under control by the second half of 2021 and that Congress would be able to pass a stimulus bill in the US this year. This morning, Congress has finally passed a stimulus bill but the assumption about the timing of the end of the pandemic is being reexamined as a result of the new coronavirus strain spreading in and around London. The new strain exhibits mutations that likely make it spread faster and may or may not make it deadlier and may or may not make it immune to the vaccines currently being rolled out. This has led to renewed worries about the timing and state of the global economic recovery in the face of a possible resurgence of the virus. In turn, investors are turning away from risky assets and buying safe havens. As a result, equities are selling off and the USD is up by 0.4% against a basket of its trading peers and up by 0.6% against the Canadian dollar. The decline in the Loonie was even greater earlier this morning when the USD to CAD rate was up 1.2%. The US dollar is now at its highest level against the Canadian dollar since the beginning of December. Adding to the volatile mix today is the failure of the UK and EU to reach an agreement on trade over the weekend. We expect the Canadian dollar weakness and higher-than-usual volatility to continue for the rest of the day.
Account to Account