The Canadian dollar remains very weak and is currently weaker against all major currencies. The Canadian dollar is the weakest against the Japanese yen, the euro and the Australian dollar. The currency sold off sharply yesterday following comments from US Trade Representative Lighthizer. He noted that talks with Canada have been difficult. He repeated his view that if difficulties continue, he expects to move to bilateral talks instead. Following the announcement, USD/CAD breached 1.30. Today, the pair remains slightly below 1.30. Following the significant sell-off in the Canadian dollar, we will lower our medium-term outlook to bearish today. Note that the currency is looking oversold, particularly against the US dollar, euro and the Japanese yen. As we have written before, the Canadian dollar has been the weakest major currency since 2018. The loonie remains weighed down by difficult trade negotiations, a slowing economy and the falling prospects for future rate hikes. Our short-term outlook remains bearish.
The USD/CAD exchange rate is currently above 1.2990. The euro is up against the Canadian dollar, with EUR/CAD currently above 1.60. The pound is up slightly against the Canadian dollar, with GBP/CAD trading above 1.7960.
Looking at Canadian economic data, we'll see Ivey PMIs later today. On Wednesday, we'll see housing starts and merchandise trade. More importantly, a Bank of Canada meeting is scheduled for that day. Governor Poloz will deliver his rate statement. No changes to interest rates are expected. On Thursday, we'll see housing starts, building permits and the new housing price index. We'll also hear speeches from BoC members including Poloz and Lane. On Friday, we'll see changes in employment as well as the unemployment rate. Last week, December GDP growth missed estimates.
As the Canadian dollar weakens, we are downgrading the currency to bearish 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.