Canadian Dollar Rises After CETA Back on Track and Oil Surges

The Canadian dollar strengthened against its U.S. counterpart on Thursday as oil rose, while a breakthrough on a free-trade agreement with the European Union improved the longer term outlook for the loonie.

Belgium agreed a deal with its regional parliaments on to approve a landmark EU-Canada free trade agreement, breaking a deadlock that has blocked the pact for weeks. “I doubt it is going to have that much impact (on the Canadian dollar) from a short-term point of view. From a much longer term perspective it’s positive in that it should help Canada diversify its export penetration,” said Shaun Osborne, chief currency strategist at Scotiabank.

U.S. crude prices were up 0.87 percent at $49.61 a barrel as a further drop in U.S. crude inventories countered investor doubts that the Organization of the Petroleum Exporting Countries will be able to implement a production cut. At 9:26 a.m. EDT (1326 GMT), the Canadian dollar was trading at C$1.3357 to the greenback, or 74.87 U.S. cents, stronger than Wednesday’s close of $1.3382, or 74.73 U.S. cents.

The currency’s strongest level of the session was C$1.3353, while its weakest was C$1.3395.

On Monday, it touched its weakest against the greenback in seven months at C$1.3398, after the Bank of Canada acknowledged last week that it had considered cutting interest rates at its policy meeting.

New orders for U.S. manufactured capital goods unexpectedly fell in September amid weak demand for computers and electronic products, which could temper expectations for an acceleration in business spending in the fourth quarter. Weak U.S. business investment has hampered a long-awaited pick-up in growth of Canada’s non-energy exports. Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year price fell 4 Canadian cents to yield 0.578 percent and the benchmark 10-year declined 48 Canadian cents to yield 1.212 percent.

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza