The Loonie ended its winning streak on shaky risk sentiment. Which factors could influence the comdoll’s direction this week?
NAFTA and oil updates
Canada has no major economic report scheduled this week, so the Loonie will most likely take cues from updates on NAFTA, oil prices, and overall risk sentiment.
Oil prices have gone back to their bullish ways after Nicolas Maduro got himself re-elected as Venezuela’s President for the next six years. See, the strongman’s victory could mean more sanctions and isolation for Venezuela’s oil industry, which could somewhat limit global oil supply.
Meanwhile, Mnuchin isn’t just talking China. In a FOX interview, the U.S. Treasury Secretary hinted that Trump could back down from his deadlines in order to get better NAFTA deals.
In addition to that, the U.S. and China agreeing to stop threatening tariffs on each other showed that the Trump administration could be flexible, which is good for Canada’s chances in its own negotiations.
If headlines over the next couple of days go along the same vein as the ones above, then we might see the Loonie resume its bullish run across the board. But if the lack of top-tier events force traders to nit-pick on details and take profits, then the Loonie could end this week with more losses.
Last Week’s Price Review
The Loonie is turning in a mixed performance this week (as of 5:00 pm GMT). The Loonie is a net loser, though, so it looks like the Loonie’s three-week winning streak is finally about to end.
Interestingly enough, the Loonie was actually a net winner for most of the week since Loonie pairs were apparently taking directional cues from the rise in oil prices. In fact, the Loonie was briefly the best-performing currency on Thursday.
Unfortunately, oil retreated during Thursday’s U.S. session and U.S. Trade Representative Robert Lighthizer said early during the Asian session that “The NAFTA countries are nowhere near close to a deal,” which kicked the Loonie even lower.
However, the catalyst that finally sent most CAD pairs below last week’s closing prices (dashed horizontal line) and made the Loonie a net loser was Canada’s disappointing CPI report, which revealed that CPI only increased by 0.3% month-on-month (0.4% expected) and 2.2% year-on-year (2.3% expected), weakening expectations for a BOC rate hike, market analysts say.
Canada’s retail sales report was released simultaneously with the CPI report on Friday. However, that was mixed since the headline reading beat expectations with a 0.6% rise (+0.3% expected) but the core reading fell by 0.2% (+0.5% expected).