The Canadian dollar advanced versus its American counterpart on Wednesday even if the price of energy dropped after the release of U.S. oil inventories showed an unseasonable large stock of crude. The U.S. Energy Information Administration (EIA) published the report showing a drop in gasoline inventories given the summer driving season but the market was surprised by the higher crude inventories in the U.S.
The Organization of the Petroleum Exporting Countries (OPEC) broke the all-time production record in July. The organization produced 33.1 barrels of oil on a daily basis. The disconnect between slowing demand for energy and the ample supply as producers follow a market share grab strategy has put downward pressure in the price of crude. The OPEC and Russia were able to stabilize prices with the promise of an oil output freeze agreement, but after the Doha summit failed there has been speculation but nothing tangible to believe it will come to pass this year despite some OPEC members going into desperation mode as they struggle to balance their budgets.
The USD/CAD lost 0.452 percent in the last 24 hours. The pair is trading at 1.3063 after the CAD was able to decouple from plunging oil prices and gained against the U.S. dollar on the back of a shrinking possibility of a Fed rate hike. The USD was able to gain momentum after the U.S. non farm payrolls (NFP) was released earlier in the month as the massive gains in jobs restarted the debate for higher rates. The economic indicators have not all been supportive of a rate hike in September and the retail sales data to be released on Friday will probably have the last say as inflation has been the focus of the Fed since the job market has reached full employment.
The drop in U.S. productivity on Tuesday put the greenback on the back foot as possibilities of a September rate hike started to fade. The presidential elections always made the SeptemberFederal Open Market Committee (FOMC) meeting a bit tricky with investors favouring a December rate hike. Data dependant Fed was always going to play this by ear, but the fate of the September rate hike will be hanging on the balance and could be buried if retail sales prove to be a disappointment.
West Texas Intermediate lost 2.947 percent in the last 24 hours. The price of crude was trading at $41.24 after the release of the U.S. oil inventories showed an anticipated drop in gasoline inventories, but a larger than expected buildup in crude stocks. That news combined with the report from OPEC about record high output levels has put the supply glut in the energy markets putting downward pressure on prices as even the organization admitted demand is not expected to recover in the short term. A possible meeting next month by OPEC could have an oil output freeze in the agenda, but at this point the freeze will be at current record high levels, which could limit the impact of the decision as there has not been a significant rise in global demand.
Canadian data will be in short supply for the rest of the week, leaving traders to price the CAD in relation to the USD and the price of energy.
Market events to watch this week:
Thursday, August 11
8:30am USD Unemployment Claims
6:45pm NZD Retail Sales q/q
10:00pm CNY Industrial Production y/y
Friday, August 12
2:00am EUR German Prelim GDP q/q
8:30am USD Core Retail Sales m/m
8:30am USD PPI m/m
8:30am USD Retail Sales m/m
10:00am USD Prelim UoM Consumer Sentiment
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar 
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