By Giles Coghlan, Chief Currency Analyst at HYCM
The Canadian dollar is being moved around on the market speculation about the Bank of Canada’s next move. At their last rate meeting in October the BoC made it clear that they are not thinking of cutting interest rates at this stage. However, they did stress that ‘trade tensions were restraining business investment while helping to cut commodity prices’. This was reference to the US-China trade war which has been weighing on investment, due to market uncertainty. Canada’s main export is oil and the currency is moved along with the oil market. The slowdown in global growth impacts the oil market and that impacts Canadian GDP negatively.
What to look for?
1. Look out for improvements with the US-China trade deal. This will impact the oil market positively and boost CAD with it. Remember that USD/CAD has around a 96% negative correlation with oil.
2. Look out for Canada’s employment data this Friday. A poor report tomorrow, coupled with the BoC’s latest dovish concern would result in weak CAD.