Falling oil prices and weak global growth prospects dragged the Loonie lower last week. Which catalysts will move the comdoll around this week?
CPI and retail sales (Oct. 19, 12:30 pm GMT)
Last month, we saw Canada’s preferred measures of inflation tick higher for the month of August. Meanwhile, headline and core retail sales readings came in much better than markets had expected.
Unfortunately for the bulls, traders were more interested in pricing in NAFTA-related uncertainties at the time.
Let’s see if Canada’s data will have a bigger impact on the comdoll this time around.
Canada’s headline consumer prices is expected to print another 0.1% decline in September, with the annualized rate estimated to fare a bit better at 1.8% against last month’s 1.7% growth.
Meanwhile, retail sales is expected to improve from 0.3% to 0.5% while the core reading – which excludes volatile items such as automobiles – expected to slow down to 0.2% from August’s 0.9% growth.
Oil price movements
As you can see below, oil price action can still dictate the Loonie’s intraday (and sometimes intraweek) trends.
This week pay close attention to Saudi Arabia. It recently shared that it “will respond to any measure against it with an even stronger measure” on countries that will slap sanctions on the kingdom.
The warning came after Donald Trump promised “severe punishment” and “very powerful” repercussions should Saudi Arabia be involved in the disappearance of Washington Post columnist and prominent Saudi critic Jamal Khashoggi.
The threat not only upped the geopolitical pressure between the world’s superpowers, but it also raised the possibility that Saudi will use its oil production capacity to help raise world oil prices.
Will the Donald clap back on Saudi’s warnings and escalate the tension? Stay tuned, fellas!
Last Week’s Price Review
The Loonie is this week’s biggest loser (as of 5:00 pm GMT), so the Loonie will soon be saying goodbye to four consecutive weeks of net wins.
But why was the Loonie so weak this week? Well, CAD bears can sing their praises to (and CAD bulls can utter their curses on) the plunge in oil prices.
As you can see in the overlay of CAD pairs above, the Loonie took extensive damage on Wednesday when oil prices slumped hard. And according to market analysts, oil slumped hard because of the equities rout on Wednesday since that fueled fears that demand for oil may weaken.
The Loonie also took additional hits (except on CAD/CHF and USD/CAD) when oil prices slumped further on Thursday. And market analysts say that Thursday’s oil slide was due to higher U.S. oil inventories and the continuing equities slide.
As a side note, oil was tilting to the upside on Tuesday, but CAD pairs had a hard time moving higher. And according to market analysts, that’s because the demand for the Loonie was sapped by the IMF’s announcement during Tuesday’s Asian session that it downgraded its global growth forecasts for the first time since 2016.