USD/CAD Loonie Under Pressure But BoC Confident In Economic Outlook
The USD advanced 0.58 percent versus the CAD in the last 24 hours. The USD/CAD pair easily broke through the 1.36 resistance level and it was only after the release of the Canadian building permit data beat expectations that the pair stabilized. The currency pair touched a daily high of 1.3620, and it depreciated as the Bank of Canada governor spoke at 12:50 pm EST to trade in a right range just below the 1.36 price line.
USD/CAD Daily Chart
Canadian housing starts rose in cada by 9.1 percent in November crushing forecasts that called for a 3.0 percent gain after the contraction of 6.6 percent in the October data. Six Canadian provinces showed an improvement in the size of the value of building permits leading with the oil rich province of Alberta, with Ontario in second place. Canadian housing has defied economists who have predicted the end of the boom fuelled by low interest rates. The soft landing that has been forecasted is taking time to materialize and the building permits boosted the CAD.
Stephen Poloz Says the Central Bank Could Use Negative Rates
Bank of Canada governor Stephen Poloz will delivered a speech titled: “The Evolution of Unconventional Monetary Policy” in Ottawa today. After cutting the benchmark Canadian interest rate two times in 2015 to record low 0.50 percent the BoC Governor admitted for the first time that negative rates could be added to the monetary policy toolkit. Poloz remains firm that the central bank has the right growth forecast on the Canadian economy, but the weakness of energy prices have expanded the time horizon for recovery. The most positive factor to Canada’s recovery is in fact that of the U.S. economy and with an upcoming rate hike signalling a moderate pace of growth in America, Canada is well positioned to boost exports to its largest trading partner.
Oil Price Lower After Market Share Grab Preferred to Stability
West Texas oil is trading close to the open price of around $37.20 but it did touch lows not seen since 2009 near $36.23 as the amount of crude in the market is pushing the price of crude further down. Short covering brought the price above the $37 price level where it remains at the time of writing.
WTI Daily Chart
The potential for a rift within the Organization of the Petroleum Exporting Countries (OPEC) after last week’s meeting failed to deliver a production cut intended at stabilizing prices, keeps the uncertainty about production in the air, with the reality of a supply glut in a lower demand environment. The low price of oil has had a deflationary effect around the world, but threatens to empty the coffers of oil producers as the current price is not sustainable for their business models to operate for a long time.