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Global risk sentiment was the main factor driving the Loonie’s mixed performance this week, ultimately ending up as a net winner as geopolitical risks faded.
Canadian Headlines and Economic data:
Tuesday:
- Canada manfuacturing PMI: Sharpest fall in new orders since December 2015
- Rising risk aversion sentiment likely added to Loonie’s weakness during the Tuesday session on rising trade worries, Brexit drama and a weakening U.S. manufacturing sector. This was also the likely reason for the drop lower in oil prices, as seen below:
Wednesday:
- Hong Kong tensions ease, China signals stimulus – the reduction of geopolitical and economic fears from Asia seems to have been the catalysts for a major turn in global risk sentiment, pushing sellers into risk assets like oil and the Canadian dollar.
- Canada posts wider-than-expected trade deficit in July
- Bank of Canada maintains overnight rate target at 1.75% – The BOC didn’t sound ready to follow the rest of the major central banks lean towards easy monetary policy, sparking the strong rally in the Loonie.
Thursday:
- Trade war uncertainty is hanging over Canada’s economy, Bank of Canada deputy governor says – possibly the cause for the broad pullback with broad risk sentiment generally positive and no negative catalysts from Canada.
Friday:
- China’s PBOC cuts reserve ratio for banks as economy stalls – this stimulative action lifted risk assets across the board, adding to a week of positive Chinese economic data, fading geopolitical concerns in Hong Kong, and a positive turn in the U.S.-China trade war to help push Loonie higher against the non-comdoll majors.
- Canadian employment increased by 81,000 in August. The unemployment rate remained at 5.7% as more people participated in the labor market.
- Canada’s Ivey PMI shows faster economic expansion in August
- Oil rises as Fed signals it could ‘act’ to sustain expansion