The Canadian dollar sold off last night and continues to trade weaker this morning. The currency has been tracking the fortunes of WTI crude in the past few days. Crude oil prices are falling after TransCanada announced that it will partially re-open the Keystone pipeline later today. This is a big week for the currency between an upcoming OPEC announcement on Wednesday and GDP figures on Friday. As we wrote earlier, crude oil prices are at risk of falling after the OPEC event while Canadian GDP looks set to continue decelerating. We have downgraded our short-term outlook on the currency to neutral today.
The USD/CAD exchange rate is currently above 1.280. The euro is flat against the Canadian dollar. EUR/CAD is currently above 1.520. Lastly, the pound is up against the Canadian dollar, with GBP/CAD trading above 1.70.
This week's economic data releases include a speech by Poloz later today, current account figures on Thursday and GDP figures and unemployment numbers on Friday. Given Poloz's repeated stance of staying "cautious" with regards to future rate hikes, his upcoming speech is unlikely to contain any big new surprises. GDP figures will be watched closely as recent economic data suggests that Canadian growth is slowing. Last week, CAD sold off following weak retail sales estimates.
As the Canadian dollar benefits from strong crude prices, we are upgrading the currency to neutral in the medium-term. Looking at a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators on the Canadian dollar currency index.