The Canadian dollar remains weak, and is mildly weaker today. The loonie has been selling off following weak retail sales figures and low CPI numbers. Earlier, the currency was supported by rising rate hike expectations, following strong growth in 2017. The latest economic data is causing rate hike expectations to fall. While the Canadian dollar is weak, crude oil prices continue to strengthen thanks to limited supply. So far, rising crude oil prices have not been able to turn around the fortunes of the loonie.
The USD/CAD exchange rate is currently just below 1.2690. The euro is also up versus the Canadian dollar this morning, with EUR/CAD above 1.4920. Lastly, the pound is also up against the Canadian dollar, with GBP/CAD trading above 1.6720.
While this is a light week for economic data, the Bank of Canada's next interest rate decision will be announced today alongside a press conference. If the Bank flips to neutral from hawkish (i.e. suggests that rate hikes will be on hold in the foreseeable future), expect the Canadian dollar to continue weakening. Thanks to the weak outlook for growth and inflation, there are few reasons for the Bank of Canada to continue hiking today.
After weakening in the latter half of October, we are now bearish on the medium-term outlook for the Canadian dollar. The currency is selling off on weak economic data and lower interest rate hike expectations. Earlier, the currency was supported after the Bank of Canada raised interest rates twice this year and suggested that more may be in store. While the loonie was in overbought conditions in September, the currency has since re-entered normal trading conditions. This is based on various technical indicators on a weekly chart of the Canadian dollar currency index.