Canadian Current Account Deficit Shrinks in Third Quarter
The Loonie was higher versus the USD after the Canadian current account balance posted a 16.2 billion deficit. The deficit shrank from last quarter’s 16.6 billion. The deficit was expected to improve after the CAD has depreciated against the USD in favour of the Canadian Trade balance. The flow of cross border investment was higher mining the effect of the weaker loonie on the current account. The Loonie has fallen 15.13 percent year to date versus the USD as monetary policy divergence expectation grows. Two rate cuts by the Bank of Canada and the anticipated rate hike from the Federal Reserve on December 16 have put downward pressure on the Canadian dollar as an even lower currency is needed to boost growth through exports.
The week in forex got off to a slow start on Monday after the U.S. Thanksgiving holiday last week shortened the number of trading days. The Bank of Canada, the European Central Bank (ECB) and the non-farm payrolls will kickstart the week that is expected full of announcements that will guide the price of the CAD.
On Monday the USD/CAD depreciated by 0.148 percent as the Loonie managed to drop below the 1.40 price line and end up trading at 1.3352. The Loonie could not outrun the drop in price of oil that gave back all the gains from the asian trading session to finish below $41 for the spot price of West Texas crude.
News of Russia crude upping production to counter Saudi price discounts that have already lost Sweden as a client as well as the lower than forecasted drop in U.S. production are two of the factors putting pressure on the price of the black stuff. Friday’s Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna could bring a production cut, but non OPEC members are signalling they are content existing with production levels and show willingness to keep pumping at current rates.
Canadian data will be plentiful this week, with indicators such as the monthly GDP girl and employment data as well as an appearance by the Bank of Canada that will try to talk down the currency after the new government has warned the market to expect a bigger deficit after lower growth forecasts. The BOC is not expected to cut rates and will look for the Fed to finally realize the interest rate divergence that has been promised for so long. Since the Fed December rate hike has been priced for so long, a token rate hike of 25 basis points to the Fed Funds rate is not expected to have a deep impact on the CAD and at this juncture the price of oil could put more downward pressure.
CAD events to watch this week:
Tuesday, December 1
8:30 am CAD GDP m/m
Wednesday, December 2
10:00 am CAD BOC Rate Statement
Friday, December 4
8:30 am CAD Employment Change
8:30 am CAD Trade Balance
8:30 am USD Non-Farm Employment Change
8:30 am USD Trade Balance
10:00 am OIL OPEC Press Conference
*All times EST
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
AUD/USD gains momentum above 0.6500 ahead of Australian Retail Sales data
AUD/USD trades in positive territory for six consecutive days around 0.6535 during the early Asian session on Monday. The upward momentum of the pair is bolstered by the hawkish stance from the Reserve Bank of Australia after the recent release of Consumer Price Index inflation data last week.
EUR/USD: Federal Reserve and Nonfarm Payrolls spell action this week
The EUR/USD pair temporarily reconquered the 1.0700 threshold last week, settling at around that round level. The US Dollar lost its appeal following discouraging United States macroeconomic data indicating tepid growth and persistent inflationary pressures.
Gold: Strength of $2,300 support is an encouraging sign for bulls
Gold price started last week under heavy bearish pressure and registered its largest one-day loss of the year on Monday. The pair managed to stage a rebound in the second half of the week but closed in negative territory.
Ethereum fees drops to lowest level since October, ETH sustains above $3,200
Ethereum’s high transaction fees has been a sticky issue for the blockchain in the past. This led to Layer 2 chains and scaling solutions developing alternatives for users looking to transact at a lower cost.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.