Even with oil prices higher, it was a tough week for the Canadian dollar, likely falling on disappointing economic updates and central bank commentary from Canada.
Canadian Headlines and Economic data
Monday:
Statistics Canada says manufacturing sales up 8.7% in July
The Loonie was off to a positive start on Monday, likely supported by the pop higher in oil sparked by the approaching storms in the U.S. But the bears took hold during the U.S. session without a direct apparent catalyst (possibly on U.S. dollar strength?), and despite oil holding onto its gains.
Tuesday:
There was broad risk-on sentiment and oil rallied further on the session, but the Loonie couldn’t follow suit. It’s possible that the combination of weak Canadian business updates (Canada Corporate Earnings Drop 8% in Second Quarter) and news of the Bank of Canada seeking public input on inflation target had traders wondering if more stimulus was coming from the BOC.
Wednesday:
Bank of Canada sees no dominant monetary policy option in review, senior deputy governor
Wilkins Says Pandemic Reveals Limits to Bank of Canada Policy
Thursday:
Bank of Canada head says central bankers must speak simply or risk losing public trust
Bank of Canada’s Macklem Braces for Long, Bumpy Recovery
Oil weakened as the hurricane in the U.S. weakened from catastrophic strength, but the Loonie was able to see some gains. It’s likely a reaction off of brief U.S. dollar weakness and positive broad risk sentiment environment after Fed Chairman Powell’s speech on inflation retargeting, the positive economic update from Canada, and BOC Governor Macklem’s call for stronger communication between central banks and the public.
Friday:
The Canadian dollar was under pressure during the Friday trading session, but the selling really picked up after the disappointing economic update from Canada (Real gross domestic product (GDP) fell 11.5% in the second quarter, following a 2.1% decline in the first quarter).