The Canadian dollar has edged higher in the Tuesday session. In North American trade, USD/CAD is trading at 1.2756, up 0.28% on the day. On the release front, there are no Canadian events for a second straight day. In the US, Retail Sales came in at 0.6%, above the estimate of 0.4%. Core Retail Sales also looked sharp, with the gain of 0.5% beating the forecast of 0.3%. There was more good news from the manufacturing sector, as the Empire State Manufacturing Index soared to 25.2, crushing the estimate of 10.1 points. On Wednesday, the US releases Building Permits and Housing Starts. As well, the FOMC publishes its minutes from the July FOMC meeting.
It’s been a disappointing August for the Canadian dollar, which has dropped 2.2% this month. The currency has become less attractive with the current tensions in the Korean peninsula. Investors have lost some of their risk appetite and stayed away from minor currencies such as the Canadian dollar, preferring safe-haven assets such as the Japanese yen and gold. Still, Canadian fundamentals are in good shape, as recent employment and housing numbers have been strong. The currency is closely linked to oil prices, with the loonie gaining ground in July as oil prices went up, only to retract in August as crude prices have dropped this month.
The markets were jittery last week, as the saber-rattling between the US and North Korea reached a fever pitch. North Korea threatened to fire missiles at Guam, and President Trump warned of severe consequences in response. The crisis weighed on stock markets last week, but the markets have rebounded as the war of words between Washington and Pyongyang has abated somewhat, increasing risk appetite on the part of investors. Still, tensions remain high in the Korean peninsula, and if either side ratchets up the rhetoric, the markets could again lose ground, and this could hurt the Canadian dollar.
