The Canadian dollar is trading higher against the US dollar on Monday (1.3333) after another supply disruption in Libya has boosted oil prices. Geopolitical risk continues to be a factor as US President Donald Trump called in an airstrike on Syrian targets when he was hosting Chinese President Xi Jinping. The loonie lost ground on risk aversion on Friday despite a stronger than expected Canadian jobs report. 19,400 jobs were added in March and the unemployment rate rose slightly as more people are seeking to re-enter the workforce. The same day the US jobs report missed expectations but became a non-factor as targets looked to the Russia-US reactions to the attack on Syria triggering a flight to safety that kept the USD bid.
Earlier this morning housing starts in Canada jumped 254,000 beating the forecast of 212,000 and adding more pressure on what is already an overheating market. March housing starts were at their highest level since 2007 according to the Canada Mortgage and Housing Corporation (CMHC). Vancouver is seen as starting to cool off in what could be a direct reaction to updated mortgage rules, while Toronto continues to trend higher.
The Bank of Canada (BoC) will publish its monetary policy statement on Wednesday, April 13. The majority of analysts are in consensus that the central bank won’t raise rates. After a proactive 2015 where it cut rates twice ahead of the drop in oil prices, the BoC spent 2016 on the sidelines as a newly elected Liberal government announced a stimulus program. Governor Poloz has tried to talk down the currency in order to boost exports, but there are some fundamental signs that the economy is recovery which might bring about higher rates sooner rather than later.
The USD/CAD lost 0.508 percent in the last 24 hours. The pair is trading at 1.3337 as the loonie advances thanks to the bump in oil prices. The USD has lost some ground at the start of the week as risk appetite has returned to markets. The price of oil has helped the CAD appreciate as well as some strong fundamental data.
Investors will be looking at the Bank of Canada on Wednesday for more insight into the stance of the central bank. Inflation is rising, but the BoC has assured markets that there is no risk of overheating but as the U.S. Federal Reserve continues its rate hike path it will put further pressure on Poloz to keep up. For now the failure of the Trump administration to pass the healthcare reform policies has reduced the anticipated number of US rate hikes as the inflation boost from a tax reform or infrastructure spending might take longer than expected before Trump was inaugurated.
Oil prices gained 1.376 percent on the Monday session. The price of West Texas is trading at $52.73 after Libya’s largest oilfield is still offline after another outage. Geopolitical risk combined with the supply disruption to keep driving oil prices higher. Russia is also hinting at going along with an extension of the Organization of the Petroleum Exporting Countries (OPEC) production cut agreement. The deal has been the biggest factor in bringing stability to crude prices after the near free fall seen at the beginning of 2016.
OPEC and other major producers have joined in an unprecedented deal with very strong compliance but oil prices have been kept in check by the downward pressure of higher production from shale producers who are not part of the agreement. US inventories have hit record highs and US exports have regions hit by the OPEC oil cuts supplied with crude.
Market events to watch this week:
Monday, April 10
4:00pm USD Fed Chair Yellen Speaks
Tuesday, April 11
4:30am GBP CPI y/y
Wednesday, April 12
4:30am GBP Average Earnings Index 3m/y
10:00am CAD BOC Monetary Policy Report
10:30am USD Crude Oil Inventories
11:15am CAD BOC Press Conference
9:30pm AUD Employment Change
Tentative CNY Trade Balance
Thursday, April 13
8:30am CAD Manufacturing Sales m/m
8:30am USD PPI m/m
8:30am USD Unemployment Claims
10:00am USD Prelim UoM Consumer Sentiment
Friday, April 14
8:30am USD CPI m/m
8:30am USD Core CPI m/m
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m
