The Canadian dollar was weaker yesterday (particularly against the euro and the US dollar) and is rebounding this morning. While crude oil prices remain supported, the loonie has been undermined by decelerating growth and inflation, NAFTA fears and conflicting messages from the Bank of Canada. While there are hopes that the Bank of Canada may raise rates at its next meeting in January (or March), Governor Poloz's tone is far less confident today relative to last summer. NAFTA also remains a significant issue, as 75% of Canadian goods exports are destined for the United States. Our short-term and medium-term trending indicators on the Canadian dollar remains bearish.
The USD/CAD exchange rate is currently above 1.2860. The euro is flat against the Canadian dollar. EUR/CAD is currently above 1.5240. Lastly, the pound is flat against the Canadian dollar, with GBP/CAD trading above 1.720.
This week’s economic data and events relating to the Canadian dollar include inflation and GDP growth. On Thursday, we’ll get retail sales, November headline CPI and core CPI. On Friday, we’ll see October GDP growth. Last week, the Canadian dollar rallied after Poloz suggested that the economy had made “tremendous” progress.
As the Canadian dollar falls on US dollar strength, we are downgrading the currency to bearish 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.