Canadian Dollar’s Shifting Sentiment May Boost Short Term Prospects

On a more positive note, business investment should pick up with the recently signed US-Mexico-Canada (USMCA) agreement providing more clarity on trade between the countries. Also, employment numbers reported at the end of the week surprised to the upside. The Canadian unemployment rate dropped to 5.6 percent from 5.8 percent and the net change in employment crushed forecasts by adding over 94,000 jobs compared to the expected 10,000. Another development that could support a beaten down Loonie is the recent agreement by OPEC and its partners to cut oil production by 1.2 million barrels per day. Crude oil leapt nearly 6 percent on the news which also sent the Canadian Dollar higher.

The data dependent BOC will closely examine housing stats reported next week as it looks for signs of a sustained rebound across the sector. As for its American counterpart, the US market could come under pressure from highly anticipated data points that pose material downside event risk to the Greenback. With the US Dollar already starting to lose some of its luster due to weaker than expected economic developments and seemingly dovish remarks from the Federal Reserve, the USDCAD could see some downside in the short term due to the recent shift in sentiment.

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