The USD/CAD had been caught in a range between 1.3990 and 1.3950 with the loonie fighting to stay below the 1.40 price level. The price of oil suddenly depreciated at 2:30 pm which is when a shocking comment from United Arab Emirates energy minister Suhail bin Mohammed al-Mazrouei said that the Organization of the Petroleum Exporting Countries (OPEC) is now ready to cooperate on crude production levels. The market had reacted positively to rumours of a Russia and OPEC cooperation deal, only to be disappointed when neither side committed. The comment did spur a comeback in the Canadian dollar and the West Texas and Brent crude prices.
Canadian house prices rose 0.1 percent month over month and 1.6 percent from a year ago. This marks a slower start than predicted as sales of houses appears to have stabilized. The CHPI does not take into consideration sales of condos and apartments.
Canadian Prime Minister Justin Trudeau was quoted as saying that the budget will not be balanced by the end of his term if current macro economic conditions continue to worsen. Next month’s budget, the first in this new Liberal government, is highly anticipated to include fiscal stimulus. How much is object of speculation as the Bank of Canada (BoC) is also awaiting the actual budget to analyze the changes to monetary policy it needs to implement if fiscal stimulus fails to reignite the economy. PM Trudeau stressed the negative impact that lower oil prices have had on the Canadian economy.
The OPEC comments created a lot of volatility in the energy markets. Production is at record levels while global demand is slowing down. The comments from the UAE energy minister came a week after the market was looking for signs of a deal between Russia and the OPEC. Standing in the way of that possible conversation where the two largest OPEC members Saudi Arabia and Iran that have clearly expressed their intentions of pumping at current levels.
WTI managed to rise above $27 after the comments after it was headed for multi year lows. Markets have been anxious given the pessimistic data so they grabbed the possibility of an oil production deal with both hands, the upside was limited and it is awaiting a denial from Saudi Arabia that would make the agreement moot. Given the price recovery that reply might not be so speedy.
There is no Canadian data to be released at the end of the week. The USD will release retail sales and the data excluding auto (core). The American retail sales data has disappointed in the past and could add further downward pressure to the USD. If a combination of a weak dollar and a stronger price of oil the loonie could end the week on a high. The situation surrounding the OPEC comments is too fragile to consider it a done deal, and will have to be ratified by some of the more influential members to be considered a reality.
CAD events to watch this week:
Friday, February 12
2:00am EUR German Prelim GDP q/q
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m
10:00am USD Prelim UoM Consumer Sentiment
*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar