For nearly two weeks the Canadian dollar has been at an 11-day high. Despite recent pessimism on an all-important US-China trade deal, the ‘Loonie’ has held its ground. This is positive news for CAD and with a speech from Carolyn Wilkins, Governor of the Bank of Canada (BoC) set to pave the way for the BoC’s outlook it is crucial that CAD holds onto its recent gains.
Bank of Canada Speech Should Provide Insight
Carolyn Wilkins for the BoC gave a speech yesterday that is likely to cover the monetary policies of the Bank of Canada. Analysts are reporting that CAD does have the potential to take on a ‘dovish’ approach following recent pressures from both the US-China deal and falling oil prices. However, the currency touched its strongest intraday level yesterday at around 1.3208 to USD.
Hopes For a Done Deal Between the US and China Rise
The ongoing trade talks between the US and China have been the talk of most media outlets for weeks if not months. Rightly so, as a done deal could see both sides benefit with a knock-on effect for currencies like the Canadian dollar which would see a boost should USD rise. The ‘Loonie’ has reached it’s 11-day high as world shares rose to their highest in nearly two years. This came about due to predictions for future economic growth and optimism that the United States can reach a deal with China in order to end their damaging and prolonged trade war.
Pressure Placed on Canada as Oil Performance Drops
With oil being one of Canada’s major exports, any deviations surrounding the commodity are expected to shape the outlook of its respective currency. This appears to have been the case for Tuesday, as Norwegian oil outputs were higher than expected. This was also paired with rising US crude inventories; the US crude oil futures fell around 1.5% to nearly $56.18 a barrel. Reports have suggested that option markets are pricing little in the way of a reaction for the Aussie Dollar as implied volatility is set to decline to multi-year lows.
For CAD, the next step will be analysing the speech from Carolyn Wilkins and the direction in which the BoC looks to take next. Later in the week, Governor Poloz will also give his speech from the BoC, which again will most likely be telling of the outlook on monetary policies for Canada.
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