The Loonie had another rally in yesterday’s session, but the rally is starting to look exhausted. The USD/CAD touched intraday lows of 1.3268 twice, representing a 0.68 percent decline. This was due to the weakness of the US dollar index and the recent strength of the price of crude.
On the release side, the Ivey Purchasing Managers Index for December came in at 59.7, while the previous month printed at 57.2. This improved number also helped with the Loonie’s bullish mood. The Ivey Purchasing Managers Index is a leading indicator of economic health and holds perhaps the most current and relevant insight into the company's view of the economy.
Tomorrow, January 9th, the Bank of Canada is expected to keep its key interest rate at 1.75 percent. Additionally, the monetary policy report will probably show cuts in growth estimates after the decline in oil prices since October 2018, which also provides some headwinds on inflation.
Concerns about US-Canadian trade relations plus a more dovish sounding US Fed chairman in the last few days have also heightened odds for an “unchanged” rate in the BoC’s first announcement of 2019. However, any surprise will make the Loonie very volatile.