The Canadian dollar has found some stability after the Brexit voter outcome trigged a wave of risk aversion in global markets on late Thursday. The loonie continues to lower to the USD as the latter has benefited from safe haven inflows. Oil prices have offered no support to the CAD, and a possible oil strike in Norway has kept the price at current levels despite global market instability.
The Mexican President Enrique Pena Nieto is in Ottawa in an official visit that could reset the bilateral relationship between the two NAFTA partners. Tomorrow will mark another edition of the “Three amigos” meeting between the leaders of Canada, Mexico and the United States. Mexico is Canada’s third largest trading partner. The U.S. elections later this year could potentially disrupt the closely knit trade cooperation between the three nations and have deeper implications as all three are part of the Trans Pacific Pact (TPP) that is yet to be ratified.
The Canadian economy is not on the driving seat as external shocks have driven investors to seek the safety of the USD, the JPY and gold. The Bank of Canada (BoC) has said the right things, but the reality is that conventional monetary policy tools available to the central bank are few and far between with the markets considering the feasibility of more unconventional resources like negative rates to make an appearance sooner rather than later if market conditions continue to not favour the growth of the Canadian economy.
The USD/CAD appreciated 0.096 percent in the last 24 hours. The pair is trading at 1.3089 after having gone through the 1.31 price level earlier in the session. The anxiety in the market due to Brexit is beginning to be less of a factor as the moves in the CAD have been more range bound as fundamental data is scarce and the comments from policy makers has not changed dramatically. The Brexit reaction seems to have played itself out with little interference from economic releases for global assets. Next week’s release of the U.S. non farm payrolls (NFP) could reverse some of the market moves or reignite the post Brexit losses depending on the results of U.S. employment in June.
Oil prices have been volatile after investors saw some buying opportunities and the possibility of a strike at several Norwegian oil fields boosted crude. Tomorrow’s oil stockpiles by the American Petroleum Institute and Thursdays the Energy Information Administration (EIA) will publish U.S. crude inventories will bring further data points that could pressure prices even further as the oil glut continues. The immediate impact of a Brexit has been negative for energy producers with some hope that the long term prospects improve if lower prices bring demand back up. So far those have proven to be ineffective as producers have kept output at record high but demand remains week with the threat of another global recession hanging after the UK EU referendum results.
Market events to watch this week:
Wednesday, June 29
10:30am USD Crude Oil Inventories
Thursday, June 30
4:30am GBP Current Account
8:30am CAD GDP m/m
8:30am USD Unemployment Claims
9:00pm CNY Manufacturing PMI
9:45pm CNY Caixin Manufacturing PMI
Friday, July 1
4:30am GBP Manufacturing PMI
10:00am USD ISM Manufacturing PMI
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar