A pretty quiet week for the Canadian dollar, so it’s likely that counter currency weakness and oil prices were the drivers for its all around winning week.
Canadian Headlines and Economic data
- Canada’s merchandise trade deficit with the world narrowed from $4.8B in December to $4.2B in January
- Canada’s GDP grows 0.3% in January, beating expectations
- Industrial Product Price Index rose 0.3% in February
- Canada Emerges From Slump With Best GDP Gain in Eight Months
Major Market Drivers for the Canadian Dollar
Volatility catalysts from Canada were pretty much no where to be seen for most of the week, with the only pre-Friday economic update coming in the form of the latest merchandise trade balance. While generally positive, it was pretty much a dud in terms of sparking any reaction from traders in the Loonie.
For the most part, it was all about oil prices this week, which were generally higher early week on reduced supply concerns, but hit a speed bump mid-week after the EIA reported a U.S. crude supply build, the first in three weeks. After a final push lower on Thursday thanks to another Trump tweet at OPEC to increase oil output, oil traders swung back into a bullish mood. This is possibly on the idea that Saudi Arabia will most likely ignore President Trump’s tweet, and possibly as traders returned to the broader theme of oil sanctions and production cuts, which have lead to crude’s best quarter since 2009–up 32% year-to-date! With oil being one of Canada’s top exports, it’s likely the bullish sentiment helped support the Loonie all week.
On Friday, we finally got a catalyst from Canada for Loonie traders, mainly the positive update on GDP. Unexpectedly, Canada kicked off 2019 with its largest output gain in eight months, and grew by 0.3% in January versus the expectation of 0.1% by economists. This likely takes off the heat brought on by rate cut calls after a weak 2018 fourth quarter, which is probably why we saw the Canadian dollar spike up higher in the Friday morning U.S. session and extend all the way to the close of the trading week to put the Loonie in the top spot against the major currencies!