The Canadian dollar is flat today after selling off again yesterday. Thanks to the ongoing sell-off in global stock markets, risk sentiment is weakening and this is hurting the Canadian dollar. As we explained in previous editions of the Canadian dollar daily update, the loonie tends to weaken during downturns. As a commodity currency, the Canadian dollar is fairly sensitive to global risk appetite. Turning to data, housing starts were better than estimates while new home prices are below estimates. Both releases had a limited impact on the currency. Later today, markets will be closely watching employment numbers. A strong figure should help rate hike expectations, strengthening the currency. Looking at the latest NAFTA headlines, Canadian Foreign Minister Chrystia Freeland said that talks have been challening thanks to hardline US demands. US President Trump wants more US content in autos and a sunset clause that would allow one party to pull out of the treaty every five years. Our short-term outlook is neutral, while our medium-term outlook remains bullish.
The USD/CAD exchange rate is currently above 1.2590. The euro is up slightly against the Canadian dollar, with EUR/CAD currently above 1.5450. The pound is up against the Canadian dollar, with GBP/CAD trading above 1.7590.
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. MoM new housing prices (0%) were slightly below expectations while housing starts (216.2k) were ahead of consensus estimates. Today 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.