The CAD has been giving its counterparts a beating as of late with a winning streak after the interest rate hike this month. The economic calendar was quiet for the loonie with data releases coming out on Monday & Friday. Monday kicked things off with Canadian Wholesale Price m/m for May. The reading was better than the expected 0,5% & the previous month’s print of 0,8% posting @ 0,9%. By Tuesday as the Federal Reserve gathered for its two day meeting the loonie strength continued not just on the back of a weakening dollar, but also the spike in oil. Saudi Arabia confirming it will cut production shipment by 1 million a day, down to 6.6 million bpd had oil prices elevated & in turn pushing loonie higher. Wednesday & Thursday saw no economic fundamentals to report out of Canada ahead of the GDP release on Friday, so Wednesday saw sideways trading for the loonie ahead of the FOMC rate announcement. Thursday the Canadian dollar continued outperforming other currencies. Friday we saw the Canadian GDP released for June which was expected at 0.2% on m/m growth; expansion increased to 0.6% for May while y/y jumped to 4.6% from 4.2%.
The greenback started the past week weaker as markets focused on the Federal Reserve. As expected the FED did not hike. The central bank said it would remain accommodative on monetary policy & continue to monitor labor conditions & inflation. The FEDs objectives are full employment & a 2% inflation target. The statement also read that the FED would maintain its policy of reinvesting in sovereign debt & rolling over of maturing treasures. The FED also said it would start the normalization of its balance sheet program relatively soon.
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WTICrude Oil REVIEW
This past week we saw the oil price adding on its gains after Saudi Arabia said that it would cut its oil exports deeper than before. The announcement suggests that the largest OPEC producer is keen to see the rebalancing accelerated. Saudi Arabia said it would cut exports to 6.6 mbpd in August. OPEC met in St. Petersburg this past Monday for a routine meeting to monitor compliance, so its no surprise that the meeting focused on the fact that members boosted production the past two months. Saudi energy minister Khalid al-Falih said that members needed to step up their efforts. Oil prices are enjoying gains with Brent solidly above $50 per barrel & WTICrude not far behind @ $49,68.
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USDCAD REASONS FOR CONTINUED POSSIBLE BEARISHNESS
-The USD/CAD declined sharply on Friday as the Canadian dollar gained strength after stronger-than-expected growth in the Canadian economy supported expectations for another interest rate hike from the Bank of Canada in the
-Canadas gross domestic product expanded 0.6 percent in May on growth in the energy, manufacturing and retail trade sectors, Statistics Canada said, exceeding economists forecasts for a 0.2 percent rise.
-The central bank raised rates to 0.75 percent earlier this for the first time in nearly seven years. Chances of another rate hike as soon as September have doubled since last week to 40 percent, while there is nearly a four-
in-five chance of a hike by October, data from the overnight index swaps market showed.
-Adding to support for the loonie, prices of oil, one of Canadas major exports, reached fresh two-month highs as investors digested signs of an easing oversupply picture.