Great week for Loonie bulls as positive geopolitical updates and news of another oil tanker event drove risk sentiment and oil prices up to support the Canadian dollar.
Canadian Headlines and Economic data
- No major catalysts from Canada to start the week, so it’s likely that the strength in the Loonie during the U.S. trading session was due to rising oil prices, up as U.S.-China trade talks loom, supply issues mount.
- During the morning London session, oil took a dip and dragged CAD lower with it, likely on fading optimism in the U.S.-China trade negotiations story after reports of the U.S. blacklisting more Chinese companies from trade, and possibly on reports of the White House looking to limit Chinese stocks within government pension funds.
- Canadian housing starts was 223,507 units in September 2019, compared to 218,782 units in August 2019
- The value of building permits issued by Canadian municipalities rose 6.1% to $9.0B in Aug.
- Canadian new housing prices were up 0.1% in August, the first increase since July 2018
- On top of the housing greenshoots report earlier from Canada, the Loonie’s shift higher was likely on positive geopolitical reports, most notably on the U.S.-China trade negotiation front (White House denies report China’s Liu He plans to leave Washington early; U.S. Weighs Currency Pact With China as Part of Partial Deal) and the news of a potential pathway to a Brexit deal. This turned sentiment in the oil markets as well, which most likely helped persuade Loonie bulls to jump back in:
- Canada gains more jobs than expected in September, unemployment drops to 5.5% – it was another surprisingly strong employment update, which likely further decreases the odds of any kind of stimulus coming from the BOC anytime soon.
- On top of the positive jobs data, Loonie gets another boost from the oil markets on the session. WTI crude was up almost another 2% on Friday on the positive global risk sentiment. We saw another push higher off of more positive updates to U.S.-China trade negotiations (Trump says ‘good things’ are happening at China trade talks), news of an Iran oil tanker being struck by missiles, and possibly on the news that the Fed is extending its overnight funding operations through January 2020, a move that supports bank reserves to make sure overnight rates don’t spike higher again to stay within a targeted range.