The Canadian dollar is currently selling off against most major currencies including the US dollar and the yen. Both commodities and commodity currencies are correcting today. WTI prices fell below $65 a barrel earlier this morning, USD/CAD is now trading above 1.2350. As markets await the upcoming Federal Reserve meeting tomorrow, traders are striking a cautious tone. While the risk of an unexpected rate hike tomorrow is limited, many are concerned that the Fed's statement will suggest a faster-than-expected pace of future rate hikes. Looking at NAFTA news, Canada and Mexico have signaled substantial progress while the US has stated that talks are progressing "very, very slowly". The US has also rejected Canadian proposals regarding auto content requirements. In general, the risk that the US will pull out of NAFTA altogether is falling thanks to ongoing talks. Our short-term and medium-term outlook on the currency remain bullish.
The USD/CAD exchange rate is currently above 1.2360. The euro is flat against the Canadian dollar, with EUR/CAD currently above 1.5280. The pound is down against the Canadian dollar, with GBP/CAD trading above 1.7320.
This is a fairly light week for economic data relating to the Canadian dollar. On Wednesday, we’ll see November GDP growth figures. We’ll also see industrial product prices and raw material prices. On Thursday, we’ll get the Markit manufacturing PMI. Last week, retail sales missed estimates while headline inflation met estimates.
As the Canadian dollar strengthens, we are upgrading the currency to bullish 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.