Though the Loonie reacted to Canada’s reports, it was Trump’s updates that REALLY hurt the comdoll last week. What are possible catalysts for the currency this week?
Last week Trump announced that his administration would impose heavy tariffs on steel and aluminum imports. The Donald has yet to make his final announcement, so Canadians are still crossing their fingers that some industries might get exemptions.
A no-exception edict would be a big blow for Canada’s auto sector, which is the biggest supplier of steel and aluminum in the U.S.
Ministers from the U.S., Canada, and Mexico are set to wrap up their seventh out of eight rounds of talks today. If they end with no clear direction on how they’ll deal with Trump’s tariffs, then we might see more uncertainty (read: selloff) for the Loonie.
BOC’s policy decision (Mar 7, 1:30 pm GMT)
In its January release the Bank of Canada (BOC) raised its interest rates as many had expected. Don’t count on another rate hike spree, however, since Governor Poloz and his team have already warned that
“…continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target.”
Also, keep in mind that BOC members are counting on business investment to make up for lower growth contributions from consumption and residential investment. But with Trump upping his tariff game, the BOC could become more cautious than they expected they would be last month.
January employment numbers
Uncle Sam’s numbers aren’t the only employment-related ones we’ll see this week! Last month we saw Canada’s headline job creation tank, as a 137K decrease part-time employment dwarfed the 49K gain in full-time employment.
The report dragged the Loonie lower before traders paid attention to faster wage growth and increase in full-time work and pulled the Canadian dollar higher.
This week analysts are expecting the unemployment rate to stay at 5.9% while and net employment to improve from -88K to +17.5K in February. Watch the deets closely in case it might cause intraday reversals for the Loonie!
Last Week’s Price Review
The Loonie is currently the biggest loser of the week (as of 6:00 pm GMT). And looking at the overlay of CAD pairs and U.S. WTI crude oil below, it looks like the Loonie was taking directional cues mainly from oil.
However, we can also see that the Loonie was actually mixed and traded roughly sideways on most CAD pairs from Monday until Thursday. Although it did start losing ground to the yen and the Greenback on Wednesday.
The Loonie only started to suffer across the board on Thursday, apparently because of trade-related worries due to Trump’s announcement that he plans to slap tariffs on aluminum and steel, which made traders extra jittery since another round of NAFTA talks, which started on Sunday, are still ongoing.
Trade-related worries continued to weigh on the Loonie. And it didn’t help that Trump tweeted the following on Friday.
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!
— Donald J. Trump (@realDonaldTrump) March 2, 2018
Sure, the monthly reading came in at +0.1%, which is within expectations.
However, Canada’s economy only expanded by 1.7% quarter-on-quarter annualized in Q4, which is below the +2.0% consensus.
Moreover, the previous reading was downgraded from +1.7% to +1.5%, which further added to the disappointment.
Anyhow, we’ve got the BOC statement and Canada’s jobs report on the docket for next week, so it’s highly likely that the Loonie will continue to provide some action.