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The Loonie ignores strong fundamentals again and follows crude oil and the mood of the global capital market

CAD - Canadian Dollar

The USD/CAD is increasing 0.1 percent (weaker Loonie) this morning, even though economic fundamentals keep coming in strongly in Canada. According to Statistics Canada, wholesale sales rose 0.6 percent to $ 64.1 billion in June, while the expectation was for -0.2 percent. This partially offsets the 1.9 percent decline in May. Sales were up in four of seven subsectors, representing 54 percent of total wholesale sales.

Apart from the strong CPI yesterday, the most important news came from the U.S. and the FOMC minutes. The FOMC minutes revealed that Fed unity is deteriorating. Fed officials argued over whether to lower rates and by how much, which is also what happened during the meeting last month. The minutes showed that the July interest-rate cut was measured to safeguard against too-low inflation and the risk of a broader collapse in business investment arising from ambiguity over President Trump's trade war.

Chairman Jerome Powell's earlier description of the move as a "mid-cycle" adjustment and not as an extended cycle of cuts, was backed up by the minutes. In general, Fed officials admitted it was essential to maintain optionality in setting the future target range for the federal funds rate; however, Fed presidents Eric Rosengren of Boston and Esther George of Kansas City disagreed in favor of no change. At the same time, a couple of Fed official participants wanted a 50-basis point cut, but the amount of easing priced into the futures market was little changed. Again, is the Fed going to disappoint market participants and Trump in September?

Key Movers

Regarding Sterling, Angela Merkel, the German chancellor, is on the wires saying that she can also find a backstop solution by October 31st. The British Pound is up in the news, +1.28 percent versus the Aussie dollar, +1.08 percent versus the Loonie, +1.10 percent versus the Greenback, and +0.95 percent versus the Euro at the time of this writing.

According to the British newspaper The Guardian, Angela Merkel clarified that when she spoke about Boris Johnson having 30 days to come up with a solution to the backstop yesterday, she was not setting a strict deadline. She said, "I said that what one can achieve in three or two years can also be achieved in 30 days. Better said, one must say that one can also achieve it by October 31. It is not about 30 days. The 30 days were meant as an example to highlight the fact that we need to achieve it in a short time because Britain had said they want to leave the European Union on October 31." At the same time, French president Macron said, "…no one will wait until October 31 to find the right solution.”

The Euro is a different story this morning. It is a mixed bag today, falling against the Pound, the Japanese Yen, and the Loonie, and rising against the Aussie dollar and Kiwi dollar. A key gauge of the manufacturing sector in Germany showed that orders at factories and services companies are dropping at the fastest pace in six years, and more companies now expect output to fall over the next 12 months. In France, it was a different story, where the same gauge showed the private sector unexpectedly gained speed in August.

Expected Ranges

USD/CAD: 1.3252 - 1.3350 ▲

EUR/CAD: 1.4689 - 1.4752 ▲

GBP/CAD: 1.6229 - 1.6327 ▲

AUD/CAD: 0.8973 - 0.9000 ▼

NZD/CAD: 0.8420 - 0.8498 ▼