The Canadian dollar is slightly higher versus the U.S. dollar after comments from Stephen Poloz were retracted yesterday afternoon. The idea that the Bank of Canada (BoC) would stand pat for a year and a half were quickly dismissed after they drove the loonie from 1.3387 down to 1.3277 within an hour, before the retraction made the currency give back gains and trade near actual levels (1.3352).
The price of energy was on the back foot today as larger inventories are expected this afternoon as well as the official data out tomorrow. Surprise drawdowns in the U.S. last week gave the price of energy a boost that put West Texas over the $50 price level, but comments from the Iraqi Energy Minister about seeking an exemption to the much touted oil output cut agreement from the second largest producer does not bode well ahead of the meeting in Vienna.
The anxiety about the U.S. presidential election’s outcome has subsided after the final debate put Secretary Hilary Clinton at the lead. There are not certainties in politics and the market will adjust if that lead changes, but for now risk appetite is back. Global stock markets are mixed as earnings disappointed in the U.S. along with the weaker than expected consumer confidence but emerging markets are getting a boost from previously underperforming markets like Brazil.
The USD/CAD lost 0.209 percent in the last 24 hours. The currency pair is trading at 1.3347 after the U.S. consumer confidence numbers surprised to the downside. The loonie rose after the 10:00 am release, only to give back gains after oil prices offered no support for the Canadian currency. Yesterday BoC Governor Poloz spoke about the lack of effectiveness of monetary policy in a low rate environment. The top monetary policymaker in Canada had to issue an apology after his comments about his comments were misinterpreted by the market leading to a CAD rally. The exact quote was “Our best plan right now, we think, is to wait for the next 18 months or so” issued late on Monday. Poloz clarified that his comments do not mean the BoC will not engage in changes in monetary policy during the next year and a half but rather the time frame for the output gap to close.
The Canadian European Trade Agreement (CETA) is for all intents and purposes dead on arrival, but former Canadian diplomats have urged the Trudeau administration to seek help from allies Merkel and Hollande. The backlash against trade deals has a been rising across the globe and the timing of the CETA could prove to be its undoing more than the actual points of contention by the region of Wallonia in Belgium. The U.K. is also a loser in this scenario as the outlook for a post Brexit trade deal is looking more cloudy than the Leave campaign put forth in the final stretch ahead of the Brexit vote.
West Texas lost 1.415 percent in the last 24 hours. The price of oil is trading at $49.45 after concerns about oversupply ahead of the release of U.S. inventories. The Organization of the Petroleum Exporting Countries (OPEC) oil production cut agreement which seemed so solid after the meeting in Algiers has taken some hits as Iraq, the number two producer, wants an exemption to keep the same level of oil revenue needed to fight the Islamic State.
The price of oil has found some stability since the OPEC and non-OPEC producers engaged in an open dialogue with the goal of cooperation. The agreement has gone from a failed deal to freeze output in March, to a cut in production in the September meeting that surprise of the market, but so far there is little concrete evidence that OPEC leadership will be able to achieve a deal internally, let alone gain the support of other major producers like Russia.
Market events to watch this week:
Wednesday, October 26
10:30 am USD Crude Oil Inventories
Thursday, October 27
4:30 am GBP Prelim GDP q/q
8:30 am USD Core Durable Goods Orders m/m
8:30 am USD Unemployment Claims
Friday, October 28
8:30 am USD Advance GDP q/q
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.