The Loonie is trading lower due to weak core retail sales and a strong Greenback
Friday 20 September, 2019
Daily Currency UpdateCAD - Canadian DollarThe Loonie is under pressure this morning after core retail sales came in at -0.1 percent, below the expectation of 0.2 percent month to month. However, according to Statistics Canada, sales in the retail trade sector advanced for the first time in three months, increasing 0.4 percent in July to $ 51.5 billion. Higher sales were reported in 6 of 11 sub-sectors, representing 71 percent of retail trade. After removing the effects of price changes, retail sales in volume terms were essentially unchanged in July.Most importantly, the Loonie is falling because of a strong Greenback. The U.S. dollar index increased around 0.21 percent following pressure on the Fed to take more aggressive steps to address U.S. funding markets. For now, the New York Fed is planning a fourth temporary liquidity injection on Friday. According to Bloomberg, the dollar-funding squeeze could get worse with the end of the quarter approaching, raising the possibility that liquidity-providing banks will retreat to close their books and meet capital needs. This situation is pushing the Greenback higher again this morning. Even worse, another round of Treasury auctions could leave markets short an additional $45 billion in cash next week.Technically speaking, the USD/CAD has a strong resistance around 1.3305 and 1.3315. The price of crude oil lacks decisiveness as Iran is put into focus. On Thursday, the country's foreign minister warned that any U.S. or Saudi strike on his country in response to the attacks on the kingdom's critical oil facilities would lead to "all-out war." Iran had denied being behind the attacks.
Key MoversThe OECD became the latest international economic organization to cut its global growth forecast. The OECD said it is dropping expected growth to 2.9 percent this year, the slowest since the financial crisis. This matters because it follows similar moves of other organizations. During an interview with Bloomberg, Chief Economist Laurence Boone said, "…we're heading slowly towards lower growth and the biggest risk that we see to these projections ... is that we remain stuck, engulfed at a very low level of growth." The British Pound is falling 0.46 percent and it is giving up part of its recent gains. According to the Financial Times, Dublin has rejected Boris Johnson's suggestion that Britain could agree to a broad Brexit deal with the EU next month. Irish Foreign Minister Simon Coveney said Britain's Brexit proposals lack credibility so far, and a deal is "not close." Meanwhile, the U.K. Supreme Court is set to issue a verdict early next week after it spent three days listening to testimony about the lawfulness of Prime Minister Boris Johnson's suspension of Parliament. The British Pound has jumped to its highest level against the dollar in two months after European Commission President Jean-Claude Juncker said a deal on Brexit is possible before Oct. 31st.
- USD/CAD: 1.3255 - 1.3300 ▼
- EUR/CAD: 1.4600 - 1.4688 ▼
- GBP/CAD: 1.6536 - 1.6610 ▼
- AUD/CAD: 0.8978 - 0.9026 ▼
- NZD/CAD: 0.8294 - 0.8348 ▼