The Canadian dollar ended flat on Friday. Trade hopes were diminished when Chinese officials cancelled off a farm visit as part of the restart of negotiations. The trade talks did not get to a great start if the delegation cut short their trip to the United States. Safe havens rose at the end of the week as trade uncertainty is on the rise. Risk events to watch during the weekend include Middle East tensions, possible Brexit developments and now a setback in US-China trade talks.
Canadian retail sales came in lower than expected and as data deteriorates it piles on the pressure on the Bank of Canada (BoC) to cut rates sooner rather than later. Employment has bought the central bank time as the Fed cut rates for a second time this year on Wednesday.
Interest rate differentials have not boosted the loonie as risk aversion is keeping the Canadian currency from rallying upward.
The Canadian economic calendar next week will not be as hectic as this week. FOMC members will be in the spotlight after the mixed messages from the U.S. Federal Reserve. PMI data in the US and Europe will give a better idea on the health of those economies. The OECD once again downgraded growth estimates as the US-China trade war drags on, and that came in before the farm trip cancellation was known. The negative impact of the prolonged dispute could take months to work itself out of the system after a deal is agreed and from what we’ve seen this week and validated by President Trump’s tweets it could not happen this year.
Brent crude is likely to have the best weekly gain since January but will close far from the highs made at the start of the week. Oil should remain supported on geopolitical risks, especially as we will likely start to calculated Saudi-led coalition military attacks. Iran does not want to go to war, but energy markets will not being ruling this risk out.
Hurricane season also remains in focus, but right now the latest threat, Jerry is still expected to move north and not pose much of risk to energy markets.
West Texas Intermedia crude’s tentative breakout of the tight three-month $50-60 range seems like it will hold up for now. Global demand concerns will likely prevent any rallies from getting out of control, but if we see a major escalation over the weekend, we could easily a run towards the $64 a barrel.
Gold prices seem directionless as we are not seeing any market moving headlines on trade, anything new from the Fed’s Bullard or Rosengren, both who dissented at this week’s policy decision and after the Fed injected cash for a fourth consecutive day. It seems the laundry list of catalysts to hold safe-havens keeps getting longer. Gold bullish momentum is going through some exhaustion now, but it seems we are one or two headlines away for it to regain its mojo.
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