CAD Could Climb On The BOC, After Being Pumped Up By Oil

  • The loonie suffered from stocks but recovered with oil prices
  • The BOC decision is the main event in the first full week of 2019.
  • The technical picture is bullish for the pair.

This was the week: Oil jitters and stuttering stocks

Oil prices made a more meaningful recovery, bouncing on reports that Saudi Arabia and other countries cut their exports to the US. However, this may be a demand rather than supply story, which does not bode well for the black gold.

Stock markets continued suffering on weak data from China and Apple’s revenue warning stemming from poor sales there. The Canadian Dollar is usually sold off with stocks, but this time was somewhat different.

The Fed’s Robert Kaplan sounded dovish about rate hikes and also about the reduction of the Fed’s balance sheet. Also, a poor ISM Manufacturing PMI added to hopes that the Fed may change its policy. The greenback retreated on the news.

While stocks continued suffering, USD/CAD dropped on the greenback’s weakness and rising petrol prices.

Canadian events: BOC left, right, and center

The loonie will continue following oil prices, which remain highly volatile. The recent rebound may not last for too long.

And there’s quite a bit of action awaiting C$ traders. The Ivey Purchasing Managers’ Index is due on Monday and will probably drop from the healthy levels seen in November and October. Housing Starts are of interest on Wednesday, and the New Housing Price Index is noteworthy on Thursday.

The central event is the rate decision by the Bank of Canada on Wednesday. When the BOC raised rates in October, it maintained the hawkish bias and seemed very optimistic about the situation. It was seen as a “hawkish hike,” and the BOC appeared to be on track for another increase in January.

However, their December meeting was already much more cautious. Governor Stephen Poloz and his colleagues said that the economy has room for growth without creating inflation, a dovish twist.

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