Canadian Dollar (CAD) Exchange Rate Broadly Softer after BOC Comments, Oil Slide

March 31, 2015 - Written by John Cameron

STORY LINK Canadian Dollar (CAD) Exchange Rate Broadly Softer after BOC Comments, Oil Slide

Prior to the publication of Canadian growth data, the Canadian Dollar was trending over 0.4% lower against the Pound and 0.5% lower against the US Dollar. The CAD/GBP exchange rate slid to 0.5297 while the CAD/USD exchange rate brushed a low of 0.7835 in response to comments issued by the Bank of Canada (BOC) and another dip in the price of Canada’s key commodity. Brent crude oil lost 1.2% on Monday, leaving the Canadian Dollar struggling against almost all of its currency counterparts. According to strategists with Morgan Stanley; ‘While the dependence on the oil sector is lower than in Norway, CAD could still get hit from a weaker banking sector affected by loans made to the oil sector. We do note that Canada should benefit from growth in the US economy, but look for larger dips to buy USD/CAD.’ The ‘Loonie’s softness was compounded as BOC Governor Stephen Poloz asserted that Canadian growth could fall short of even the negatively revised figures due to the ‘atrocious’ impact of softer oil prices.

Poloz was quoted as saying; ‘In theory lower oil prices mean [putting] more money in consumers’ pockets, but... if an oil company cancels [an investment] project, laying off a worker, that guy will not have the money to buy a new pick-up truck. That spreads very quickly.’ The Canadian Dollar failed to derive much benefit from Monday’s better-than-expected domestic reports. Canada’s Industrial Product Price figure came in at 1.8% on the month in February following a positively revised decline of -0.3% in January. Economists had predicted a gain of 0.9%. Similarly, the nation’s Raw Materials Price Index advanced by 6.1% in February on a monthly basis following January’s negatively adjusted -7.8% decline despite estimations for a figure of 4.5%.

In the hours ahead the Canadian Dollar could experience movement as a result of the latest batch of domestic ecostats. On the month the Canadian economy was shown to have contracted by -0.1%, less than the -0.2% expected. This resulted in an annual growth figure of 2.4%, in line with forecasts but down from annual expansion of 2.8% in the third quarter. As the week progresses other Canadian reports to be aware of include the nation’s RBC Manufacturing PMI (due out on Wednesday at 14:30 GMT) and Thursday’s International Merchandise Trade figure. ‘Loonie’ volatility could also be occasioned by any fluctuations in oil prices and US developments. Friday’s Non-Farm payrolls report is likely to prove the catalyst for notable currency market movement.

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