USD/CAD: Loonie Weakens As Oil Consolidates Steep Losses

The Canadian dollar weakened versus its US counterpart across the previous week. The US dollar Canadian dollar exchange rate ended Friday’s session at 1.3052. The Canadian dollar is extending last week’s losses at the beginning of the new week.

Iran – US tensions, the signing of the US – Sino first phase trade deal and a downbeat US jobs report drove the greenback across the previous week. The US dollar bounced back after both the US and Iran indicated that they were not looking to elevate tensions further. However, the dollar slipped from weekly highs on Friday after the US jobs report was weaker than what analysts were expecting in both the headline jobs creation figure of the report and the wage growth component of the report.

This week the main focus is set to be on the signing of the US – China phase one trade deal on Wednesday. This could bring an optimistic backdrop to trading. Given that the weekend saw no escalation in geopolitical risk, optimism from the US – China trade deal is expected to overshadow unrest and risk of conflict in Iran.

There is no high impacting US data today. Tomorrow sees the release of US inflation data.

Jobs Data & Oil Prices

The commodity sensitive Canadian dollar slipped across the previous week in line with falling demand for oil. As tensions eased between the US and Iran and as US crude inventories unexpectedly increased, West Texas Intermediate slumped over 6% across the week, settling on Friday at US$59.04. US crude oil is declining further in early trade on Monday.

The stronger than forecast Canadian jobs report helped to cap losses from falling crude oil prices. The Canadian economy added 35,200 jobs in December, bouncing back from a dismal report in November. The increase in jobs came as the unemployment rate fell to 5.6%, down from 5.9% in November, when the country lost 71,200 jobs. The stronger report helped quell concerns over the state of the Canadian labour market.

There is no high impacting Canadian data due to be released this week. This means that the value of the Loonie could be closely tied to fluctuations in oil.

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