The Canadian dollar had a volatile trading day and gave back gains versus the USD on the back of concerns for the price of oil after global supply is expected to rise and the U.S. dollar gained against majors across the board. Commodities were mostly lower against the rising greenback.
The failure to reach an oil freeze output agreement at the Doha summit by Organization of the Petroleum Exporting Countries (OPEC) members, Russia and other producers removed a key factor in price stability for crude. The oil strike in Kuwait kept prices trading at six month highs. The USD got a boost from employment data that showed that last week unemployment claims continue to shrink to 247,000, the lowest level in 43 years. In Brussels European Central Bank (ECB) President Mario Draghi issues a press conference after the central bank announced its monetary policy would remain unchanged after a massive quantitative easing push in March. The ECB Chair brought nothing new to the table and there was a sell off or EUR after his speech ended. There was no clear commitment to a particular strategy going forward with the central bank to be monitoring the economy for signs of growth.
Forex traders will now look ahead to next week’s Federal Open Market Committee (FOMC) meeting. There is little expectation of a rate move, but the statement will contain language that will guide investment decisions.
The USD/CAD gained 0.778 percent in the last 24 hours. The pair did not have enough downward momentum to break under 1.26 and the news of the end of the Kuwait oil strike and Russia’s plans for higher production took a tool in the price of crude. The USD/CAD is trading at 1.2727 ahead of Canadian inflation and retail sales data due on Friday.
Crude falls With End of Strike Pointing at Continuing Glut
Oil fell as concerns of oversupply continue and the USD rose against major pairs as employment data might persuade the Federal Reserve to raise rates sooner rather than later. The focus shifted from the OPEC internal political battle that sinked the Doha agreement to the monetary policy divergence best exemplified by the ECB and the Fed. The ECB signalled interest rates would remain low for longer and now the market will look at the Fed after positive employment data with hopes of higher interest rate rhetoric.
The Canadian economic calendar will close the week with two major releases. The inflation and retail sales data will be published together on Friday, April 22 at 8:30 EDT. Inflation is expected at 0.4 percent but core retail sales (excluding auto sales) is expected to have contracted to -0.8 percent after a positive 1.2 percent growth last month. Canadian fundamentals have improved and the rise in oil boosted the loonie. It remains to be seen how sustainable crude prices are as the OPEC remains divided, Russia is expected to increase production and there is a forecasted fall in North American production that could hurt Canadian producers.
CAD market events to watch this week:
Friday, April 22
8:30am CAD Core CPI m/m
8:30am CAD Core Retail Sales m/m
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar