The Canadian Dollar has been on a rollercoaster of late as conflicting signals are emanating from key areas which drive the Canadian Dollar. Two key points recently have been the fluctuations on the price of Oil and Trade Wars, they both have a big impact on the price and value of the Canadian Dollar as their outcomes directly influence the Canadian economy.
GBPCAD had been nudging higher on Canadian Dollar weakness as the Trade War concerns continue to expose cracks in the potential for longer term Canadian Dollar strength. In conjunction with the mixed moves on sterling, GBPCAD could rise towards 1.80 if there is further evidence that the Bank of England might raise interest rates. The big news for the UK is Friday with the latest UK GDP data released, the Bank of England have linked raising interest rates to positive news here.
Markets have been bracing themselves for a hike in Oil production quotas which has seen the price of Oil rise. Ever since the quotas were announced in 2016 we have seen Oil steadily rise in value presenting a stronger Loonie Dollar. The details from the OPEC (Organisation Petroleum Exporting Countries) are slim but by committing to stand by previous quotas the price of Oil and the CAD did rise. This will continue to be an issue, I do feel with OPEC’s.
Trade Wars have been threatening the recent strength of the Canadian Dollar too, although on this point the outlook is more mixed. The Trade Wars issue on the one hand is negative because it is felt lower trade would be bad news for the Canadian economy, a net export globally. However, the market appears to feel that the US economy whilst the protagonist of the Trade Wars, will come out the best since its economy will prove most resilient. This has seen the US Dollar rise and with the US being the main trading partner for Canada, it has seen a much stronger CAD too.
Governor Poloz of the Bank of Canada will speak on Wednesday 20:00 UK time, it appears the recent trade tensions will only take the pressure off the Bank of Canada to raise interest rates since markets are fearful that any slide in trade will now make any future rate rises much less likely. This is the kind of commentary I would be expecting from the BoC although any further twists and turns in the Trade Wars situation will also be key to the Canadian Dollar this week.
If I were buying Canadian Dollars I would be targeting any spikes for the Pound against the CAD, possibly around the Poloz speech but the UK GDP (Gross Domestic Product) data due on Friday may also lend Canadian Dollar buyers a hand. All of this must be taken with a pinch of salt since much of the behavior on the Loonie will also come down to the developments in the Trade Wars issues.
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