The Canadian dollar continues to be tied to the fate of energy prices. Oil got a boost from Venezuela and Russia’s oil ministers about a possible mid-March meeting to further discuss the output freeze. Oil prices rose and in tandem the Canadian dollar followed.
The Bank of Canada (BoC) refrained from cutting its benchmark rate in January and the central bank along with the rest of the market is awaiting the release of the first Liberal Federal budget from the Trudeau government. The Liberal campaign promised investment and stimulus to get Canada back on the path of growth. Economic conditions have deteriorated since the election, but the now elect government remains committed to boost growth through spending. The International Monetary Fund (IMF) agrees, and has issued similar recommendations to other nations ahead of the G20 meeting in Shanghai this weekend.
The USD depreciated 1.091 percent versus the CAD in the last 24 hours. The USD retreated against all major pairs and the Canadian dollar was boosted by the news of a meeting of energy producers in March. The USD/CAD touched lows not seen since December as the loonie soared pulled higher by rising oil prices. The USD/CAD is trading at 1.3539 and could continue falling if there are further details on OPEC’s production plans and a possible cooperation agreement with non-OPEC producers.
The CAD has been heavily correlated with the price of oil since the beginning of the year. West Texas gained 2.63 percent and Brent 1.21 percent after Venezuela’s Oil Minister made comments about a possible mid-March OPEC meeting, where Saudi Arabia, Qatar and Russia will be in attendance. The Russian Oil Minister supported those comments and shared some details on the proposed oil freeze. Venezuela and Russia are confident that a freeze will stabilize oil prices, but questions remains about non participants like Iran.
The Canadian dollar will have little economic data to trade on. The biggest macro event of the weekend will be the G20 meeting in Shanghai. The Canadian Finance Minister and the governor of the Bank of Canada will be in attendance. There is little expectation of a Shanghai Accord, emulating the Plaza Accord of 1985. Although cooperation is the big theme of the meeting, a concrete detailed action plan has been dismissed by Chinese and U.S. officials beforehand. The IMF has urged nations to do more as a collective and this G20 meeting is a good place to start showing a more unified front to placate the global slowdown.
CAD events to watch this week:
Friday, February 26
8:30am USD Prelim GDP q/q
*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar