Global risk-on sentiment and oil’s rally were the likely drivers in a mixed week for Loonie pairs.
Canadian Headlines and Economic data
- Canadian home prices just had worst February since the financial crisis
- Bank of Canada sees rising global debt as top threat to growth
- Statistics Canada reports manufacturing sales up 1.0% in January
Major Market Drivers for the Canadian Dollar
Headlines and economic updates from Canada were almost completely absent and didn’t arrive until the latter half of the week. We got the latest update on Canadian house prices (-0.1% in January) and manufacturing sales (up 1.0% to $57.1B), giving us a mixed update on the Canadian economy and only a small burst of volatility after the release of the latter report. So, it’s likely that once again, global risk sentiment, counter currency catalysts, and oil were the big drivers of Loonie pair price action.
Global risk sentiment was leaning towards positive for a good chunk of the week, arguably influenced by several factors including positive surprises from this week’s top tier global economic reports (most notably a bounce back in U.S. retail sales and the latest U.K. GDP report) and likely from the latest Brexit developments (no-deal Brexit rejected; Brexit extension supported; signs of deal still being worked on between DUP and U.K. government). We also got positive signs from the ongoing U.S.-China trade situation and the potential stimulus moves as China plans to reform its foreign investment laws and vows new tax cuts. All combined, these are likely the reasons why we saw the Loonie beat out the “safe haven” currencies (USD, JPY, and CHF).
And the Loonie likely got an additional boost from its top export, oil, as oil traders went into bull mode on expectations of export cuts from Saudi Arabia and Venezuela, as well as reduced output from the U.S. early in the week. WTI crude peaked at around $58.95 (an over 5% gain on the week) and Brent crude oil futures topped out at around $68.14 on Thursday, where we also saw the Loonie top out against the other high-yielding comdolls (AUD and NZD) that tend to out perform it during risk-on periods.
But Friday wasn’t so kind to oil as the black crack pulled back from its gains on rising U.S. production concerns and on the potential for the U.S. to extend Iran sanction waivers raises the odds of supply rising. This was likely the main drag on the Loonie for the session, to a point where it couldn’t keep its gains against the non-safe havens to close the week as a net loser.