Week In FX Americas – Loonie Loses Rock Star Status

The Canadian Economy has now officially lost its financial rock-star mentor, ex-BoC governor Carney. Next Monday, on Canada Day, Mark Carney starts his new role as the new top dog at the Bank of England. He has left the loonie in the capable hands of new governor Stephen Poloz. After five years at the helm, and in some of the most interesting of financial times, the CAD happens to be encroaching on its two-year lows outright.

Early on Friday morning the CAD got a mild boost from its April growth data being on target with market expectations. The +0.1% gain in GDP was mostly driven by the +0.3% gain in the services sector. Despite the headline print being optically positive, analysts note that the underlying reality is suggesting a different story line.

A small percentage of investors expect the loonies’ competitiveness to be called into question in the short term. Currently, there seems to be a “continuing divergence in the Canadian economy away from export competitiveness and towards leveraged consumption.” This is not an underlying positive for the G7 economy. Some of the currency’s weakness should be buffered by the continuing foreign demand for Canadian assets. However, it should not provide strength, it will slow down the weakening trend.

On the last trading day of month and quarter, the market price action, egged on by Fed rhetoric, has managed to take our short dollar stop-loss orders as prices cleared the mid-week dollar highs. Analysts note that despite the daily’s remaining top heavy, the market seems to be building a multi-decade base. For now, the dollar remains better bid on dips and ahead of NFP.

WEEK AHEAD

* CNY Manufacturing PMI
* EUR Euro-Zone Consumer Price Index Estimate
* USD ISM Manufacturing
* AUD Reserve Bank of Australia Rate Decision
* GBP Bank of England Rate Decision
* GBP BOE Asset Purchase Target
* EUR European Central Bank Rate Decision
* USD Change in Non-farm Payrolls
* USD Unemployment Rate
* CAD Net Change in Employment

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.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

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