Crude Oil is Stable as OPEC Summit Gains Traction with All Eyes on Friday’s NFP
The Canadian dollar managed to end ahead of its U.S. counterpart on Thursday as the price of oil ended flat after a volatile day of trading. The much discussed OPEC and Russia meeting appears to be taking place on March 20. Any chatter that points to the summit taking place will help oil stand its ground even as U.S. inventories and Iranian higher oil production announcement. The USD/CAD is trading at 1.3397 after questions have been raised on the resilience of U.S. employment after the ISM Employment index worried investors.
The Canadian dollar posted superb gains in the month of February, gaining over 400 points against its US counterpart. The impressive rally has continued in March, as the currency jumped over 100 points on Tuesday, propelled by a GDP report which was stronger than expected. Canadian GDP is released monthly, and the January release of 0.2% beat the estimate of 0.1%. Although GDP actually dropped from December, the sentiment towards the loonie remains high in the markets, as the recent recovery in oil prices, although modest, has been good news for Canada, a major oil producer.
The Bank of Canada (BoC) and the Canadian government have done their part to stoke optimism in the economy. The BOC was proactive in 2015 with two rate cuts and while seemingly pondering a cut in January it held off awaiting the yet to be released federal budget. The Liberal government was elected on a campaign of stimulus despite running a higher deficit. Economists agree that monetary policy is tapped out in this case and fiscal policy and infrastructure investment should be favoured. Canadian Prime Minister Justin Trudeau said earlier today that governments should be against the balanced-budget trap. The biggest question mark that remains for March 22 when the budget is release is how big will the measures be with estimates circulating around 20 billion Canadian dollars.
The USD lost 0.304 percent against the CAD in the last 24 hours. The mixed signals from U.S. employment data have taken its toll on the big dollar as some traders are anticipating the U.S. non farm payrolls (NFP) to disappoint. The CAD has been boosted by the gains in price of oil, that although modest in the last couple of days continue on an upward trend despite the lack of a final agreement on the output freeze and with multiple reports of higher inventories and increased production from other Organization of the Petroleum Exporting Countries (OPEC) members like Iran.
Friday’s trading action will be defined by the U.S. non farm payroll data on Friday. This is one of those rare instances where Canadian employment data will not be published at the same time as the American numbers. The next Canadian employment change will be released on Friday, March 11. The Canadian Trade Balance will be the sole guide for the loonie as the market will be eagerly awaiting the U.S. employment numbers after the mixed data this week.
CAD events to watch this week:
Friday, March 4
8:30 am CAD Trade Balance
8:30 am USD Average Hourly Earnings m/m
8:30 am USD Non-Farm Employment Change
8:30 am USD Trade Balance
8:30 am USD Unemployment Rate
*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar