CAD Daily Updates

07 May 2018

The Canadian dollar is mixed today. CAD is currently slightly higher against the euro and the Australian dollar, while selling off against the US dollar and the British pound. Last week, the loonie traded sideways despite recent strength in the US dollar. Thanks to good domestic data (February GDP growth in particular) and strong crude oil prices, the Canadian dollar remains supported. 

Turning to recent developments, NAFTA talks have resumed in Washington. This is a "make or break" week for the discussions, as the US is pushing to reach an agreement before Mexican and US elections later this year. According to a  Reuters report, the three sides have only two or three weeks left to complete an agreement. Talks this week will focus on automotive content rules. Trump has been pushing for North American auto content to rise to 75% (from the current 62.5%). The US is also pushing for production in areas with higher wages (at least $16/hour). Current Mexican wages are less than $3/hour. While some progress has been made in recent weeks, the issue of North American auto content remains highly contentious. 

Looking at crude oil, the commodity remains in a firmly bullish trend. As we wrote in our  crude oil daily update, concerns regarding Iranian and Venezuelan supply have keep the commodity on a strengthening path. Thanks to higher prices for Canadian crude (looking at the Western Canadian Select benchmark), the Canadian dollar has benefited from rising crude oil prices. Our short-term and medium-term outlook on the Canadian dollar remains bearish. 

The USD/CAD exchange rate is currently above 1.2860. The euro is down slightly against the Canadian dollar, with EUR/CAD currently above 1.5350. The pound is up slightly against the Canadian dollar, with GBP/CAD trading above 1.7410.

This is a relatively light week for the Canadian dollar economic calendar. Later today, we’ll hear a speech by the Bank of Canada’s Lane. Tomorrow we’ll see housing starts for April. On Thursday, we’ll see the new housing price index for March and see the BoC’s Review (its quarterly publication). On Friday, the most important day, we’ll see changes in employment for April and hear a speech by the BoC’s Wilkins. Last week, GDP growth in February was ahead of expectations.

Updated 
Outlook
Bearish

As the Canadian dollar weakens, we are now bearish 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. 

Updated