The Loonie takes the bottom spot among the major currencies after a weak showing from Canadian economic data and a drop in oil prices.
Canadian Headlines and Economic data
- Canadian corporations earned $105.2 billion in operating profit in Q4 2018, down 3.9% from the previous quarter
- Canadian CPI rose 1.4% on a y/y basis in January, down from a 2.0% increase in December
- Canada Q4 current account deficit widens to $15.48 billion
- Canadian Industrial Product Price Index (IPPI) declined 0.3% in January
- Weaker GDP Than Anyone Expected Shows Canadian Growth Stalling
Major Market Drivers for the Canadian Dollar
Global risk sentiment took a back seat to Canadian economic data and oil prices this past week, but for a broad rundown of what drove global risk sentiment check out my review of this week’s risk sentiment drivers in my Japanese yen weekly review here.
In short, global sentiment was in “risk-on” mode most of the week on positive geopolitical developments, and it appears it did have an influence on relative performance. The Canadian dollar spent the first half of the week weaker than the other comdolls relative to the safe haven currencies, but from Wednesday on, though, individual country stories started to drive price action to a point where the Aussie and Kiwi were much weaker than the safe havens and the surging British pound by the Friday close.
The likely big driver for the Canadian dollar this week was oil, which took an early week hit after U.S. President Trump tweets at OPEC saying that they should “relax and take it easy” and that the “world cannot take a price hike.” As we can see in the overlay chart above of CAD pairs and WTI crude prices, oil fell roughly 3.50% after the tweet, which correlated with a uniform move lower in CAD pairs. But the oil market steadied and recovered on Tuesday as traders saw OPEC ignoring Trump’s pressure, which also correlated with a recovery in Loonie pairs.
Canadian dollar price action steadied through Wednesday and Thursday, largely ignoring negative leaning Canadian economic data (disappointing Canadian CPI, current account, raw material prices), instead flowing higher with oil on the previously mentioned risk-on lean in the global markets and likely with help from the bullish crude oil inventories number on Wednesday (-8.6M barrels vs. 3.7M barrels previous).
Friday is where it all changed as we saw a triple hit of catalysts that likely drove oil and Loonie pairs lower: weak U.S. economic data (ISM manufacturing index hits lowest level since November 2016), Canadian economic data (weaker-than-expected GDP m/m at -0.1%), and oil takes a hit on demand concerns. This trifecta of negativity was enough to for traders take oil and all Loonie pairs back into the red, and crown the Loonie as the “worst performer of the week.”