The Canadian dollar is recovering today after falling sharply in the last two trading sessions. The currency began sliding last Friday after US bond yields rose sharply. Yesterday, the currency continued selling off thanks to the global stock market rout. Today, the slide in the stock market is taking a breather (so far), and the Canadian dollar is higher as a result. As a commodity currency, the loonie tends to weaken during global downturns. On the other hand, safe havens such as the US dollar and the yen tend to strengthen during times of peril. Looking at latest NAFTA headlines, Canadian Ambassador David MacNaughton has warned that NAFTA uncertainties are reducing business investment and hiring in Canada. Yesterday, Prime Minister Justin Trudeau raised the stakes for the negotiations, claiming that Canada was ready to walk away from a bad deal. Our short-term and medium-term outlook on the currency remain bullish.
The USD/CAD exchange rate is currently above 1.2510. The euro is up against the Canadian dollar, with EUR/CAD currently above 1.5530. The pound is flat against the Canadian dollar, with GBP/CAD trading above 1.7480.
Looking at economic data from Canada, markets will be focused on jobs numbers at the end of the week. Later today, we'll get trade balances and Ivey PMIs. On Wednesday, we'll see building permits. On Thursday, we'll get new housing prices and housing starts. Friday is the most important day, and we'll see changes in employment as well as the unemployment rate. Last week, November GDP growth met consensus expectations.
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.