Risk off sentiment and weaker than expected Canadian data boosted the US dollar Canadian dollar exchange rate on Wednesday. The US dollar, Canadian dollar exchange rate rallied to a 3-day high of 1.3193. The pair is holding steady in early trade on Thursday.
Following from the upbeat US ISM non- manufacturing print on Tuesday, Canadian dollar investors were keen to see what kind of strength there was in the Canadian economy. However, investors were disappointed after the Canadian Ivey PMI. The data revealed that Canadian purchasing activity dropped to a four-and-a-half-year low at 48.2. This was below the 49.3 forecast and short of the 48.7 recorded in September. Last month the index fell into contraction for the first time since 2016.
At the most recent Bank of Canada monetary policy meeting, the central bank adopted a more dovish stance. This data supports the change in position by the central bank and confirms the reasoning behind its move. The prospect of loser monetary policy dragged on the Canadian dollar.
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Adding to the Canadian dollar’s woes, the price of oil slipped over 1% after OPEC confirmed that it would not be looking to extend current production cuts when it meets again in December. US crude stockpiles also roes by 7.929 million barrels for the week ending November 1st, surpassing market participants’ expectations. Crude oil and the Canadian dollar (against the US dollar) are positively correlated. When the price of crude falls, so does the value of the Canadian dollar relative to the US dollar.
Today there is no high impacting Canadian data. Investors will look ahead to Friday’s unemployment data for further clues over the health of the economy.
Dollar Gains As Risk Off Dominates
The dollar pushed higher across the board on Wednesday as risk appetite declined. With no distraction from the US economic calendar, investors were once again focused on US — China trade relations.
Earlier in the week, trade deal optimism sent the US stock market to all time highs, boosting the dollar. Yesterday, investors were taking risk off the table as reports indicated that a phase one US — China trade deal may not be signed now until December. The pushing back of the signing of the agreement unnerved investors. When risk appetite declines, investors look towards the dollar for its safe haven properties.
Today investors could glance towards some mid-tier US economic data. However, the key driver will be US — China trade related news.
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