The Loonie took cues from risk sentiment and oil prices last week. Will we see the same themes this week?
GDP report (June 29, 12:30 pm GMT)
Canada’s monthly GDP came in at 0.3% in March, faster than the 0.2% uptick that markets had expected. The quarterly reading missed estimates, however, which is party why the Loonie still fell sharply after the GDP release.
This week analysts expect to see a 0.1% increase on top of March’s 0.3% growth. A much stronger-than-expected report could propel the Loonie from its recent lows, while a weaker reading could inspire more bears to step in.
Oh, and take note that the U.S. is set to print some second-tier data. So unless we see significant hits or misses from the monthly report, it’s unlikely that the Loonie will see sustained price reaction from the event.
Trade war concerns
A few hours earlier the Donald warned “all countries that have placed artificial Trade Barriers and Tariffs” on the U.S. that they will be met with “more than Reciprocity.”
The tweet comes after Trump threatened 20% additional tax on cars from the EU and before WSJ reported that the administration is considering discouraging Chinese investors from getting their hands on U.S. tech.
If China or one of Uncle Sam’s other major trading partners roll out their reciprocal measures, or if Trump steps up his threats, then we could see renewed risk aversion that could rock export-related currencies like the Loonie.
Keep your eyes glued to the tube (or on Twitter)!
Last Week’s Price Review
The Loonie was last week’s biggest loser and also happens to be this week’s biggest loser (as of 5:00 pm GMT), so the Loonie is apparently on track for the sixth consecutive week of net losses.
The Loonie initially appeared to take directional cues from oil, which was rising at the time because of rumors that OPEC would only increase oil production by 300,000 to 600,000 barrels per day, contrary to earlier statements that OPEC may ramp up oil production by 1.5 million barrels per day.
However, the Loonie decoupled from oil priced during the U.S. session. No clear reason why, but it’s possible that some traders were unwinding their positions ahead of BOC Deputy Governor Lynn Patterson’s speech.
Patterson didn’t really talk about the BOC’s forward guidance or the economy in her speech, though, which is probably why the Loonie began to track oil prices higher.
Oil turned lower on Tuesday, so most CAD pairs also took hits. Interestingly enough, however, the Loonie also initially benefited from Former U.S. Treasury Secretary Lawrence Summers’ interview wherein he said that:
“Trade war is not likely to be large enough that its direct effects damage the economy profoundly.”
Perhaps the Loonie just got lucky since other currencies were reeling at the time as the Greenback strengthened. It’s also possible, however, that some traders were just pleased with the comments and bid up the Loonie. After all, the U.S. is Canada’s biggest export market.
Anyhow, the Loonie traded roughly sideways after that before trading broadly lower on Thursday, even though oil prices began rising at the time. And some market analysts suggested that the Loonie was down in the dumps because investors were wary of loading up on the Loonie ahead of Canada’s CPI and retail sales reports on Friday.
And unfortunately for the Loonie, Canada’s CPI and retail sales reports both surprised to the downside, which gave the Loonie a final, solid bearish kick even as oil prices surged.