The Loonie danced to the tune of its major counterparts last week. Will the comdoll see uniform price action this time around?
Don’t bet the farm on it. See, a wholesale sales report is the only data scheduled for release this week, so it’s likely that Canada’s economic calendar will dictate the Loonie’s price action.
Instead, pay attention to crude oil price movements. Recall that Black Crack has been taking hits from a cocktail of bearish news including Saudi Arabia increasing its production for Asian markets (which breaks against its pinky promise to OPEC), a re-opening of Libya’s oil port, and slowing demand from China.
NAFTA updates could also affect the Canadian dollar. Mexican President-elect Andres Manuel Lopez Obrador recently sent a letter to Trump calling for “a new chapter in the relationship between Mexico and the United States, based on mutual respect.”
And then there’s the small bit about a potential currency war between the world’s most circulated currencies. The Donald has labeled China and the EU “currency manipulators,” which led analysts to believe that the next chapter of the global trade war includes weakening of some of the Loonie’s major counterparts.
Last Week’s Price Review
Like last week, the Loonie didn’t really track oil prices that closely. Also like last week, the Loonie’s price action was a bit messy, which means that CAD pairs were taking their marching orders mainly from opposing currencies.
There were two instances when the clearly had uniform price action, though.
The first is when the Loonie traded higher during Wednesday’s U.S. session. Oil prices were rising at the time, and it’s possible that the Loonie may have taken some directional cues from oil prices. However, market analysts were pointing to Trump’s optimistic NAFTA-related announcement that (emphasis mine):
“I just wanted to let you know that we have had very good session with Mexico, with the new president of Mexico — who won overwhelmingly — and we’re doing very well on our trade agreement.”
“So we’ll see what happens. We may do one separately with the Mexico and we’ll negotiate with Canada at a later time. But we’re having very good discussions with Mexico.”
Moving on, the second instance of uniform price action is when the Loonie jumped higher across the board on Friday, apparently because Canada’s retail sales report surprised to the upside by printing a 2.0% increase for the headline reading, which is the best reading in seven months.
Canada’s CPI report was released at the same time as the retail sales report. And while the monthly readings were within expectations, the annual headline reading came in at +2.5%, beating the +2.3% consensus and the strongest annual increase in six years to boot.