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The Loonie was the weakest currency last week, and that’s AFTER the BOC hiked rates as expected. Will this lead to more losses this week?

CPI and retail sales reports

On Jan. 25 at 1:30 PM GMT we’ll see Canada’s retail sales data. Analysts are expecting core retail sales to post a 0.9% growth after seeing a 0.8% uptick in October, while headline retail sales is expected to come in at 0.8% in November after the previous month’s 1.5% increase.

Then on Friday (Jan. 26) at 1:30 PM GMT Canada will print its CPI numbers. Consumer prices are expected to have fallen by 0.3% in December after gaining 0.3% in November.

Take note, however, that Bank of Canada (BOC) members prefer to watch three CPI measures: the annualized common, mean, and trimmed CPI growth rates.

Look at the numbers closely and see if BOC Governor Poloz and sub-boss Wilkins were right to be concerned over “buildup” in CPI if they don’t raise rates quickly!

Oil price updates

The Loonie might have had a wonky price action last week, but that doesn’t mean it didn’t take directional cues from oil prices.

This week we have the usual EIA’s crude oil inventory report, which could either support/alleviate concerns that the U.S. is offsetting OPEC’s production restrictions by producing more crude oil.

Last Week’s Price Review

The Loonie’s price action was a chaotic mess and many Loonie pairs were just essentially trading sideways during the course of the week. With that said, it’s still worth pointing out that the Loonie was the worst-performing currency yet again.

Overlay of CAD Pairs & Crude Oil (Black Line): 1-Hour Forex Chart
Overlay of CAD Pairs & Crude Oil (Black Line): 1-Hour Forex Chart

Interestingly enough, the BOC delivered on a rate hike this week while expressing concern about NAFTA and communicating a cautiously hawkish forward guidance.

However, this was widely expected, so the Loonie tossed and turned as bulls who were happy with the rate hike and the BOC’s hiking bias tried to push the Loonie higher while bears who were none too happy with the BOC’s cautious tone tried to drag the Loonie lower.

The bulls later gained the upper hand, though, thanks to hawkish comments from BOC Boss-Man Stephen Poloz and BOC Sub-Boss Carolyn Wilkins during the BOC presser, namely the part where they said that hiking too slowly risks an undesirable “buildup” in CPI, as well as reassurances that the BOC is ready for any NAFTA-related scenario.

Speaking of NAFTA, market analysts blamed the Loonie’s broad-based slide on Thursday on renewed fears that the U.S. may pull out of NAFTA (after Trump made some comments).

Oil was also sliding at the time, though, and it’s highly likely that the Loonie was taking directional cues from oil as well.

Anyhow, the Loonie’s price action late became a mixed during Thursday’s U.S. session and until Friday, which means that the Loonie became vulnerable to opposing currency price action. No clear reason why, though.