The Canadian dollar is mostly higher today. The loonie is strengthening against all major currencies except the US dollar. Yesterday, the currency weakened as the US dollar strengthened while crude oil prices gave up some of their recent gains.
Turning to recent news, Canadian Foreign Minister Chrystia Freeland said that good progress has been made with regards to auto negotiations. US demands for higher North American auto content has been the most contentious NAFTA issue, and earlier progress was limited. According to a Reuters report, the US has significantly softened its stance in order to close a deal. Canadian Prime Minister Trudeau also stated that he recognizes NAFTA timelines, and was heavily engaged in order to make faster progress.
Turning to economic data, today is a significant day for the Canadian dollar as both inflation and retail sales figures will be released. While inflation is expected to rise (thanks to a recent surge in crude oil prices), retail sales will be watched closely for signs of a continued slowdown in the overall economy. Our short-term outlook on the Canadian dollar is bullish, while our medium-term outlook remains neutral.
The USD/CAD exchange rate is currently above 1.2670. The euro is down slightly against the Canadian dollar, with EUR/CAD currently above 1.560. The pound is down slightly against the Canadian dollar, with GBP/CAD trading above 1.7810.
This is a significant week for economic data and events relating to the Canadian dollar, thanks to an upcoming rate hike decision. The Bank of Canada maintained interest rates, while suggesting that accommodative policies were set to continue. ADP employment changes for March (43k vs. 16k previous) accelerated from prior figures. Later today, we’ll see both YoY retail sales for February as well as the YoY consumer price index for March. Last week, the BoC business outlook survey suggested that Canadian businesses are optimistic regarding future revenues.
As the Canadian dollar trades sideways, we are now neutral on the currency 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.