The Canadian dollar is higher across the board today. CAD is currently the strongest against the Japanese yen, the euro and the British pound. Yesterday, we warned that the Canadian dollar was looking oversold based on technical indicators. Following recent strength, this is no longer the case and the currency is now trading in a normal range. Today, crude oil is surging thanks to tensions in the Middle East and the Canadian dollar is tracking the commodity higher. While the currency is no longer oversold, it remains in a firmly bearish trend. As such, we continue to expect the currency to keep weakening over time.
Turning to the latest NAFTA news, Prime Minister Trudeau said that Trump appears to be "enthusiastic" regarding a NAFTA deal. According to Reuters, a source claimed that there is a growing willingness from the US side to get a deal done. Canadian Foreign Minister Chrystia Freeland's meeting with U.S. Trade Representative Lighthizer lasted four hours (instead of the usual 60 minutes) last week. Our short-term and medium-term outlook remains bearish.
The USD/CAD exchange rate is currently above 1.3060. The euro is down against the Canadian dollar, with EUR/CAD currently above 1.6050. The pound is down against the Canadian dollar, with GBP/CAD trading above 1.8280.
This is a relatively light week for Canadian economic data. Wholesale sales (0.1% vs. 0% expected) were slightly better than consensus estimates. On Thursday, the Bank of Canada's Wilkins will deliver a speech. Friday is the most important day, and we'll get both retail sales and the consumer price index. Consensus estimates are calling for headline inflation to decelerate to 1.6% year-over-year in February. Last week, year-over-year home sales and house prices were both at multi-year lows.