Oil prices and pre-emptive positioning made up most of the Loonie’s volatility last week. Does this mean it would be influenced by top-tier reports this week?
Here are some potential catalysts:
The Great White North doesn’t have any major report on the docket this week, but we will hear from Bank of Canada (BOC) head honcho Stephen Poloz himself not once, but TWICE throughout the next couple of days.
He will give a speech today at 7:30 pm GMT House of Commons Standing Committee on Finance in Ottawa, and the will also appear before the Standing Senate Committee on Banking, Trade and Commerce on April 25 at 8:15 pm GMT.
Remember that Poloz was already downbeat in his presser last week, so it won’t be a surprise if we see more of the same sentiments in his appearances this week. Stay tuned!
Last Week’s Price Review
Oil was on a tear this week, but the Loonie had a more mixed performance but still a net winner this week (as of 5:00 pm GMT). What’s up with that?
Well, looking at the chart above, we can see that the Loonie was taking some directional cues from oil prices. However, there are also very clear instances when oil and CAD pairs had diverging price action.
So, what prevented the Loonie from tracking oil prices closely?
Well, the Loonie had a steady start but began to find buyers during Tuesday’s London session even as oil dipped.
And as mentioned in Tuesday’s London session recap, there weren’t any direct catalysts for the Loonie’s broad-based rise, but I also noted that preemptive positioning ahead of the BOC statement on Wednesday was a possible reason.
Speaking of the BOC statement, I detailed in Wednesday’s U.S. session recap that the BOC statement was a disappointment, which caused the Loonie to tank across the board, even as oil prices rose.
As for some details, BOC Boss-Man Poloz reiterated the BOC’s hiking bias. However, Poloz gave his hawkish message a dovish spin when he said that the BOC will “remain cautious with respect to future policy adjustments.”
Also, Poloz expressed concern about the negative effects of higher interest rates on high household debt in Canada, as well as concerns with regard to trade.
Oil continued to rise, however, so the Loonie’s losses were only limited and most Loonie pairs were even tilting to the upside by Thursday before becoming more mixed when oil prices later fell.
The Loonie then steadied for a while before finding buyers during Friday’s London session, even though oil prices resumed their slide.
There was no clear reason for that, but as noted in Friday’s London session recap, that may have been due to preemptive positioning ahead of Canada’s top-tier reports, particularly Canada’s CPI report.
Sadly for Loonie bulls, Canada’s March CPI report was a swing and a miss since headline CPI only increased by 0.3% month-on-month (0.4% expected) and 2.3% year-on-year (2.4% expected).
And while the headline reading for Canada’s retail sales managed to meet expectations for a 0.4% month-on-month increase, the previous reading was downgraded from +0.3% to just +0.1%. The core reading, meanwhile, was flat (+0.4% expected).