Loonie clings to 7-week high as oil prices rise
Tuesday 4 April, 2023
Daily Currency UpdateThe Canadian dollar remains close to a seven-week high as USD/CAD trades around 1.3440. This is largely due to a rise in oil prices which continued up from yesterday’s sharp rally and the positive Canadian building permits data from February. Data released today from Statistics Canada showed that Canadian building permits surged by 8.6% in February, following a revised decline of 3.7% in January. On the oil front, the Organization of the Petroleum Exporting Countries (OPEC) announcement on Monday to cut more production caused quite a stir in the markets and led to an increase in the price of oil. US crude prices rose by 1% reaching $81.19 per barrel.
Key MoversThe US dollar index (DXY) is under selling pressure as it trades below 101.82. The USD is struggling to gain momentum despite a 60% chance of the Federal Reserve increasing its policy rate by 25 basis points in May. The current risk-positive atmosphere, and news of the US dollar losing its appeal as a reserve currency, are also contributing to the greenback’s broad weakness. Data released by the U.S. Census Board revealed new orders for manufactured goods, dropped by $3.9 billion (0.7%) in February, bringing the total to $536.4 billion. This figure is worse than the analysts’ predictions for a decrease of only 0.5% following the decline of 2.1% in January. The US Bureau of Labor Statistics also published data today indicating that the number of job openings for the final day of business in February was 9.9 million, down from 10.5 million in January, and lower than the market projection of 10.4 Million.
The euro hit an intraday high of 1.09300 against the dollar, its highest since early February, and currently trades around the 1.09000 mark. Given elevated eurozone inflation, the European Central Bank (ECB) is expected to keep hiking interest rates, which could lead to an increase in the value of the euro. Data released today shows that the Eurozone Producer Price Index for February came in at -0.5% from the previous print of -2.8%. This was lower than the anticipated -0.3%. With banking fears no longer, a pressing issue in the eurozone, the ECB has leeway in the coming months to play catch-up with the Federal Reserve in terms of monetary policy.
The pound rose above 1.25 today for the first time since June. The surge in the pound occurred due to traders feeling more optimistic about the currency, which is currently trading below its levels since 2016. The pound continues to rise despite a statement from Bank of England (BoE) policymaker, Silvana Tenreyro, that the BoE might need to begin reducing rates earlier than anticipated. The current expectation is for the BoE to increase rates by 25 basis points in May to reach 4.50%, after which it will cease tightening. The pound has benefitted the most this year from the reprising of market rates, while the dollar continues to suffer.
- EUR/CAD: 1.461 - 1.4739 ▲
- GBP/CAD: 1.6636 - 1.6814 ▲
- AUD/CAD: 0.904 - 0.9123 ▲
- USD/CAD: 1.3412 - 1.346 ▲