The Canadian dollar continued to sell off yesterday and is trading sideways this morning. The currency has been weakest against the US dollar and the British pound. On the other hand, the Canadian dollar is gaining against the euro and the Japanese yen. In general, the Canadian dollar remains in a bearish trend as GDP growth decelerates and hopes for rate hikes fade. As markets look to 2018, factors such as NAFTA negotiations and the crude oil market pose additional risks to the currency. According to a recent Reuters poll, many analysts expect the currency to strengthen once the NAFTA issue is fully addressed. We share the same view. Our medium-term outlook on the currency remains bearish.
The USD/CAD exchange rate is currently above 1.2860. The euro is down against the Canadian dollar. EUR/CAD is currently above 1.510. Lastly, the pound is up against the Canadian dollar, with GBP/CAD trading above 1.7330.
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). The BoC maintained rates as expected while signaling a continuation of existing monetary policies. Ivey PMIs were lower than the last print (63 vs. 63.8 prior). Later today we’ll see housing starts. Last week, Canadian GDP figures beat expectations helping the currency 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.