The Canadian dollar was mostly flat yesterday (while rising against the euro and the pound), and is trading sideways this morning. Today is a big day for the currency given the upcoming Bank of Canada rate decision and statement. Given the deceleration in GDP growth since last summer, markets will be closely reading the Bank's statement for indications of future rate hikes. We'll also see US Energy Information Administration crude oil inventories and production figures. Crude oil bulls are nervous following data from the American Petroleum Institute that showed a build-up of refined product inventories. As gasoline and distillate inventories rise, crude oil is falling on concerns that end-user demand remains weak. Our short-term outlook on the currency is neutral.
The USD/CAD exchange rate is currently above 1.2690. The euro is flat against the Canadian dollar. EUR/CAD is currently above 1.50. Lastly, the pound is down against the Canadian dollar, with GBP/CAD trading above 1.70.
Given an upcoming BoC rate decision, this is an important week for Canadian economic data and events. The trade balance was better than expected (-1.47b vs. -2.7b expected). Later today, we’ll get a rate decision and a statement from the Bank of Canada. On Thursday we’ll get the Ivey Purchasing Managers Index. On Friday we’ll see housing starts. Last week, Canadian GDP figures beat expectations helping the CAD rally.
As the Canadian dollar strengthens on better GDP data, we are upgrading the currency to neutral in the short-term. Looking at various technical indicators on a daily chart of the Canadian dollar, the currency is now trading within normal conditions.
As the Canadian dollar falls on lower rate hike expectations and weaker crude oil, we are downgrading the currency to bearish 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.