The Canadian dollar is mostly flat today. In recent days, the currency has sold off sharply thanks to the ongoing stock market and crude oil rout. Crude oil prices fell sharply yesterday after US production data rose to all-time highs. The United States has now replaced Saudi Arabia as the world's second-largest crude oil producer, and isn't too far from Russia (the world's number one producer). As a commodity currency, the Canadian dollar tends to weaken when global risk appetite recedes. If risk appetite improves today, the loonie should strengthen accordingly. Turning to NAFTA news, US senators are optimistic that President Trump will not walk away from NAFTA. According to Reuters, Trump is looking to improve upon the agreement instead of scuttling it. In other news, Robert Lighthizer, the US lead negotiator, expressed frustration with Canada and has considered splitting the discussions into separate talks with Canada and Mexico. Despite his comments, a US trade representative claimed that the country still wants a three-way deal. Our short-term outlook is neutral, while our medium-term outlook remains bullish.
The USD/CAD exchange rate is currently above 1.2580. The euro is flat against the Canadian dollar, with EUR/CAD currently above 1.5410. The pound is flat against the Canadian dollar, with GBP/CAD trading above 1.7450.
Looking at economic data from Canada, markets will be focused on jobs numbers at the end of the week. Trade balances (-$3.2b vs. -$2.2b expected) and Ivey PMIs (55.2 vs. 61 expected) both missed expectations. Building permits (4.8% vs. 2% expected) were ahead of consensus expectations. Later today, 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 runs out of steam, we are downgrading 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 a normal range.
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.