2019-11-11 • Updated
The sentiment surrounding the Loonie has turned bullish last week due to the recent hawkish BoC’s rhetoric. The Bank of Canada Governor Stephen Poloz and his deputy Carolyn Wilkins made it clear – a rate hike is imminent, if not in the July 12 meeting, then in September. Worries over the housing market and subdued inflation rates might temper the central bank’s willingness to act promptly. Raw material and industrial prices released last Friday dropped lower indicating the absence of inflation; CPI figures were lower than expected (0.1% against forecasted 0.2%).
The currency’s correlation to oil prices is becoming weaker. On the heels of the BoC’s comments, the Canadian dollar didn’t stop strengthening despite the declining oil prices. Today we saw a modest pick-up in the US dollar against the CAD despite the surging oil prices. So, we suggest the CAD will be driven predominantly by the economic releases and the BOC officials’ comments in the upcoming future. The next economic indicators will be published at 4:30 pm on Thursday – trade balance data and building permits. On Friday, we will get a package of labor data out of Canada and the US. If the US data beat market’s expectation on the back of disappointing release of the Canadian employment indicators, the USD/CAD will rise higher.
The current technical outlook is neutral. USD/CAD trades at 1.2975. On a sustained recovery back above the 1.3000 handle, a fresh bout of buying could lift the pair towards 1.3070/1.3100 resistance area. On the downside, 1.2965 level may serve as immediate support, which if broken would send the pair to 1.2945/1.2930 levels.
China has issued new oil product export quotas to allow oil companies to send surplus barrels overseas, particularly Sinopec, which has the highest volume among quota holders. While the exact quota volume remains undisclosed, oil companies are forecasted to export approximately 3.5 million metric tons of clean oil products in September, a 10% increase from August.
Thanks to the incredible advancements in horizontal drilling and fracking technology, the United States has experienced a mind-blowing shale revolution. They've become the heavyweight champion of crude oil production, leaving Saudi Arabia and Russia in the dust. They even turned the tables and became net exporters of refined petroleum products in 2011.
Oil prices rebounded slightly on Friday but are still expected to show losses for the week due to concerns about slowing growth in the US and China. US crude futures rose 2.7% to $70.41 per barrel, while the Brent contract increased by 2.5% to $74.33 per barrel.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
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