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Canadian Economic Data Failing to Support the Loonie

CAD - Canadian Dollar

Market participants are failing to support the loonie even after the domestic economy is showing signs of expansion. Yesterday the Canadian dollar strengthened to 0.7490(1.3351) from psychological support of 1.3400 after Retail Sales figures exceeded the expectation of 1.0 posting 1.1% on an M/M bases. Exclude the volatility of auto sales and the Retail Sales jump to 1.7% vs expectations of 0.9%. Today Wholesale Sales posted better than the consensus of 0.9 printing 1.4%, and yet the loonie is falling to the top end of our trend channel 1.3513(0.7400) and major resistance.
The loonie's slide has to be on the back of crude oil prices, falling to a two month low. WTI crude has fallen from 63.77 on Monday to 58.42 dollars per barrel as of 10 am today down another 5.05% today alone. Trade Tensions between the US and China are the driving force behind the drop in prices, a new technology cold war is escalating between the two powers, and market participants are not pricing in a resolution any time soon, and this is weighing on demand sending prices low in WTI and Brent crude.

Key Movers


The EUR came under renewed downward pressure last week as an escalation in US-China trade tensions reminded markets that the euro area finds itself in a particularly vulnerable position should US-China trade talks collapse. Adding to US-China related uncertainty, the European elections might ignite Euro weakness. The European Parliament election over 23-26 May (the result will be out Sunday evening) looks likely to be a market-relevant event this time. The election result could affect, especially on Italian politics, triggering government changes or further confrontation between EU and Italy, posing a weakening pressure on EUR in the medium term. The pair is currently changing hands at 1.1155 against the Greenback.

Over in the UK, the GBP/USD touched a 4-month low of 1.2624 on reports suggesting the UK Prime Minister was going to be resigning by the end of the business day 22nd May after Andrea Leadsom, Leader of the House of Commons resigned over the PM’s Brexit plan and says she no longer believes in the governments approach. It’s fair to say there is chaos within the UK government over Brexit which will keep the Pound under selling pressure.

The latest FOMC minutes have indicated a patient approach in setting interest rates in the near-term, and the market's view is that US rates will remain where they are for now.

Expected Ranges

USD/CAD: 1.3431 - 1.3513 ▲

EUR/CAD: 1.4977 - 1.5046 ▲

GBP/CAD: 1.6959 - 1.7077 ▲

AUD/CAD: 0.9224 - 0.9294 ▲

CAD/NZD: 1.1372 - 1.1460 ▼

EUR/USD: 1.1107 - 1.1156 ▼