Mixed price action for the Loonie this week in what was probably a quiet battle between rising oil prices versus mixed economic updates from Canada.
Canadian Headlines and Economic data
- Slowest improvement in manufacturing conditions for two-and-a-half years: IHS Markit
- Bank of Canada’s Poloz says stimulative rates needed for temporary soft patch
- Canada’s Ivey purchasing index shows faster expansion in March
- Canada sheds 7,200 jobs in March, jobless rate remains at 5.8 percent
- Canada Won’t Ratify New Nafta Deal If Metals Tariffs Remain in Place
Major Market Drivers for the Canadian Dollar
Loonie pairs kicked off the new month and week on a downbeat note, but soon cheered up during the U.S. trading session despite a sour update on Canadian manufacturing conditions from IHS Markit. The likely motivation for Loonie bulls to wake up was the early week rally in oil as seen in the overlay chart below. Oil markets rallied higher on news of OPEC being at its lowest production levels since 2015, and likely on the continued oil sanctions situation in Venezuela and Iran limiting the amount of crude in the open market. It’s also possible that optimistic comments from Bank of Canada Governor Poloz had a hand in the early week rally as well, citing that the current soft patch may only be temporary.
Oil’s influence seemed to have held onto Loonie pair through Wednesday, where we saw the black gold meet sellers after oil inventories data showed a sharp build, prompting oil and Loonie pairs to tilt to the downside from that point on. And with broad risk-on sentiment in play and no fresh negative Canadian catalysts on Wednesday, it’s likely Loonie traders were also back to focusing on the potential for rate cuts and possibly on the weak manufacturing PMI data released on Monday.
On Thursday, the Ivey PMI report showed that economic activity bounced off of a 5-month low in March to 54.3 versus 50.6 in February. There didn’t seem to be a strong correlated reaction in Loonie pairs off of the news, likely indicating counter currency influences were more in play.
And on Friday, we got the latest Canadian jobs data, which showed a net loss of over seven thousand jobs in March. The employment rate remained at 5.8% and hourly wages rose by 2.3% year-over-year (versus 2.2% in the previous month. The reaction in Loonie pairs was pretty tame and mostly lower on the session, probably as traders were conflicted between the slightly weak Canadian jobs update versus the one last spike higher in oil going into the weekend on the strong US jobs report and reports of military action in Libya.