The Canadian dollar is slightly weaker this morning against all major currencies except the Australian dollar. The currency is selling off today in spite of higher crude oil prices. Looking at the latest economic data, Markit manufacturing PMIs suggest that the country's manufacturing sector continues to grow. In recent weeks, both growth and inflation data have exceeded expectations, increasing the likelihood of tighter monetary policy. Based on bond prices, markets are betting that the Bank of Canada will raise rates two to three times over the course of the year. Turning to NAFTA, there are no major updates following comments from Canadian Foreign Minister Freeland yesterday. Our short-term and medium-term outlook on the currency remain bullish.
The USD/CAD exchange rate is currently above 1.2280. The euro is up slightly against the Canadian dollar, with EUR/CAD currently above 1.5370. The pound is flat against the Canadian dollar, with GBP/CAD trading above 1.750.
This is a fairly light week for economic data relating to the Canadian dollar. MoM November GDP growth (0.4%) met expectations. Industrial product prices (2.2%) and raw material prices (6.2%) were lower than previous figures. Markit manufacturing PMIs were ahead of expectations (55.9 vs. 54.8 expected). 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.