The Canadian economic calendar a considerably quiet week. We did not see much economic events being released for the past week. However the Canadian dollar weakened against its American counterpart. The oil prices continued to affect the performance of the Canadian dollar. Surprisingly the U.S dollar gained strength after the elections, as investors being optimistic about the U.S economic outlook. If anything the election results showed that investors may think that Donald Trump president is not as bad for the markets as expected.
The current oil crisis has contributed massively to the loonie weakness, seeing that oil is one of Canada’s major exports.A barrel of crude oil is @ $43.41 after OPEC said October output reached another record. The persisting oversupply has been the main cause , increasing doubts of whether OPEC’s plan to limit production is achievable. This has seen a 15% drop from its October high. If over production continues than we might continue to see loonie weakness. OPEC meets on 30th November to finalize the Output deal, it will be interesting to see what happens in the coming weeks, particularly for the Canadian dollar.
Another concern for the loonie is Presidential-Elect Donald Trump who says he will renegotiate trade agreements that do not benefit the U.S. This is a major concern because Canada exports the the United States. CANADA FX DEBT-C$ hits new 8-month low as oil tumbles, investors buy greenbacks
BULL or BEAR on CAD?
-I am a bear on the loonie
1.Loonie will weaken if oil markets continue to fall
2.Canadian dollar reached its lowest level in 8 months indicating weakness
3.Trump trade plan & its effects on CAD
CAD did not perform particularly well closing lower against its counterparts, with USDCAD reaching 1.35 which is an 8 month high for the pair.
U.S election being the main focus globally this past week there was little data released from Canada. Ironically Donald Trump’s victory over Hillary Clinton saw a stronger dollar with the markets doing the opposite of what was expected. The dropping of oil also weakened the loonie. Iran and Iraq told OPEC that they raised output last month and Saudi Arabia also almost reaching record highs. The oversupply of oil has seen the OPEC to unlikely finalize the Algiers accord come 30th November. Oil Falls to Eight-Week Low as OPEC Output Gain Threatens Accord
On the political front, Trump winning the elections could be a cause for concern for Canada. Trump seems as if he will put America first ahead of the rest of the world. This might bring a dark cloud over Canada and its trade agreement with the U.S. Trump may altogether tear up trade agreements that are not beneficial to America. This may in turn force the Bank of Canada to cut rates. Governor Poloz might just cut rates now after holding back last month.Trade Chill From Trump May Make Canada Rate Cut More Likely
Keep in mind that what Donald Trump might do regarding trade is still speculation, nevertheless it still plays an important part when it comes to the CADs performance.
However Trump being elected does not necessarily signal all doom and gloom for Canada as we could see gains for commodities, with Canada’s gold stocks being able to benefit from rising inflation. Trump election is a blessing and curse for Canadian market