The Canadian dollar is fairly mixed today. The currency is flat against the US dollar and the euro, but weaker relative to the British pound. While crude oil prices surged yesterday (following lower inventory data as we wrote in our crude oil daily update), the Canadian dollar failed to benefit thanks to poor retail sales figures. Retail sales numbers from December were significantly below estimates, leading markets to question the outlook for economic growth. While expectations of strong growth and more rate hikes have supported the Canadian dollar this year, the outlook for growth is increasingly mixed. Following world-beating GDP growth figures in 2017, the Canadian economy is likely to be weighed down by NAFTA-related issues and a weakening commodity sector in 2018. While our medium-term outlook on CAD remains bullish, recent weakness may lead us to reconsider our outlook over the coming weeks. Our short-term outlook on the currency remains neutral.
The USD/CAD exchange rate is currently above 1.2710. The euro is flat against the Canadian dollar, with EUR/CAD currently above 1.5650. The pound is up against the Canadian dollar, with GBP/CAD trading above 1.7760.
This is a fairly light week for Canadian economic data. MoM retail sales (-0.8% vs. 0.2% expected) missed estimates by a wide margin. Today is the key day, and we’ll get the January consumer price index and core CPI. Last week, manufacturing sales missed estimates by a wide margin.
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.