The Canadian dollar is weaker against major currencies after a lower drawdown than expected in weekly crude inventories and a higher buildup of gasoline stock pushed down oil prices. American energy production is ramping up and will further pressure crude prices even as the Organization of the Petroleum Exporting Countries (OPEC) is due to meet this weekend with an extension of the production cut deal sure to be in the agenda.
The OPEC has complied with the agreed cuts, and other non-OPEC nations that joined deal have also done their part. Russia has been the outlier yet to hit the expected goals, but Saudi Arabia has cut more than their share to keep the supply levels low. The OPEC cuts and other disruptions to supplies due to geopolitical or weather related issues have kept the price of energy stable, but as more of the non-OPEC producers start ramping up production there could be another free fall of crude prices. The upcoming meeting in Vienna for the Group will no doubt focus on what they plans are going forward after the original six month timeline for the production deal ends in June.
The surprise announcement in the UK to call for a snap election has added another election process to an already crowded European calendar. This weekend French citizens will head to the polls for the first round of the presidential elections. The polls are showing a race that is too close to call and four candidates are splitting the vote with only two qualifying for a second round. Scandals and independent candidates have added uncertainty to a decisive leadership change in France.
Risk aversion has not favoured the CAD and with oil facing challenges from rising US production the loonie is not on sure footing despite a strong economic performance in the first quarter of the year.
The USD/CAD rose 0.583 percent in the last 24 hours. The pair is trading at 1.3475 as the USD is recovering from a downtrend in previous sessions. The greenback has been hit by comments from President Donald Trump about it being too strong. Treasury Secretary Steve Mnuchin has walked back some of those comments adding that Trump is not talking down the dollar. Goldman Sachs is advising clients to rethink their earlier comments on a strong dollar reaching parity with the euro.
The price of energy fell 2.28 percent on the Wednesday trading session. The price of West Texas is trading near lows of $51.18 as despite the efforts of the OPEC supplies in North America are higher as production ramps up in particular from shale producers. The biggest factor in the drop in oil prices was the gasoline stocks buildup of 1.5 million barrels ahead of the driving season.
US data will be front and center on Thursday as the Philly Fed Manufacturing Index and weekly unemployment claims are released at 8:30 am EDT. Treasury Secretary Steve Mnuchin will speak at the Institute of International Finance Policy Summit, in Washington DC. Mnuchin is hitting his stride as his profile becomes more established and is the biggest advocate of the tax reform package that had the reflation trade going earlier in the year.
Market events to watch this week:
Thursday, April 20
8:30am USD Philly Fed Manufacturing Index
8:30am USD Unemployment Claims
11:30am GBP BOE Gov Carney Speaks
12:30pm GBP BOE Gov Carney Speaks
1:15pm USD Treasury Sec Mnuchin Speaks
Friday, April 21
4:30am GBP Retail Sales m/m
8:30am CAD CPI m/m
Saturday, April 22
All Day OPEC Meeting
Sunday, April 23
All Day French Elections
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar