After surging higher last Friday, the Canadian dollar is lower against all major currencies today. Looking at the currency against its major peers, the Canadian dollar is the weakest against the Japanese yen, the British pound and the Australian dollar. While global risk sentiment appears to be improving today, the Canadian dollar is being weighed down by falling crude oil prices. As a commodity currency, the fortunes of the Canadian dollar are closely related to crude oil (one of the country's largest exports). While strong US jobs and the falling rig count helped crude oil prices rise last Friday, they are falling this morning as concerns grow regarding future US supply.
Turning to political news, Canadian Foreign Affairs Minister Chrystia Freeland has stated that Canada will not bend to Trump's tariff threats. Following the seventh round of NAFTA negotiations, only limited progress has been achieved. The latest round saw talks close on three chapters (Good Regulatory Practices, Administration and Publication, and Sanitary and Phytosanitary Measures). For a new deal, NAFTA members need to agree to 30 chapters. US Trade Representative Lighthizer has suggested moving to a bilateral negotiation process in order to speed up talks. Our short-term and medium-term outlook remains bearish.
The USD/CAD exchange rate is currently above 1.2810. The euro is up against the Canadian dollar, with EUR/CAD currently above 1.580. The pound is up against the Canadian dollar, with GBP/CAD trading above 1.7780.
This is a very light week for Canadian economic data. On Tuesday, BoC Governor Poloz will deliver a speech. On Thursday, we'll see ADP employment changes. On Friday, we'll see Canadian portfolio investments in foreign securities and foreign portfolio investments in Canadian securities. This week's data releases do not tend to have a meaningful impact on the currency. Last week, changes in employment were lower than expectations.
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.