The Canadian dollar strengthened against its major challengers in the Asian trading session on Wednesday, followed by a rise in oil prices after President Trump’s decision to withdraw from the landmark nuclear accord with Iran that was agreed in late 2015. The U.S. decision will likely lead to a tightened supply of crude in the global markets. Oil prices returned to 3 ½ year highs yesterday after the decision was announced.
NAFTA still presents the biggest risk to the Canadian dollar and should ultimately be the deciding factor on whether the BOC delivers further rate hikes. The negotiations have been going on for over 8 months. Trade officials from the US, Mexico and Canada have indicated that progress has been made and if an agreement is reached, this should lead to a bullish outlook for the currency.
Strong Canadian building permits data came out strong at 3.1% vs the forecasted 2.0% this morning. CAD strengthened almost half a cent leading up to the announcement this morning. Over the past 24 hours, the loonie edged down to 1.2975 against the USD, with support around the 1.31 region.
Looking ahead for the week we have NHPI, Employment Change and Unemployment data to be released.