After initial strength in the Canadian dollar, the US dollar Canadian dollar exchange rate rallied to a high of 1.3178 on Tuesday. The pair eased back slightly into the close, ending the session at approximately the same level that it started. The dollar is advancing versus the Canadian dollar in early trade on Wednesday.
The Canadian dollar strengthened in the European session on Tuesday thanks to rising oil prices which offered support to the commodity related “loonie”. OPEC Secretary General Mohammad Barkindo confirmed on Tuesday that the oil producing nations group will be discussing deeper cuts to production when they meet in December. The prospect of oil supply being cut boosted its price.
The Canadian dollar is closely correlated to the price of oil; higher oil prices result in a stronger Canadian dollar.
Looking across today there is nothing of note on the Canadian economic calendar. Canadian dollar investors will keep a close eye on the price of oil, amid US — Sino trade deal hopes and the prospect of further oil production cuts.
King Dollar Rules
The dollar gained versus all its major peers in the previous session amid mounting optimism that the US and China would agree a trade deal sooner rather than later. A report in the Financial Times said that US officials are considering removing tariffs on some Chinese imports as a concession to get a trade deal done, possibly as soon as this month.
The US manufacturing sector has experienced a downturn amid the ongoing US — China trade dispute. Any signs that tensions are easing could help restore confidence and prevent the sector from contracting further. This would be beneficial for the US economy and therefore the US dollar.
Data published by the Institute for Supply Management (ISM) revealed that economic activity in non-manufacturing sectors increased at a faster pace in October than what analysts had been expecting. The non-manufacturing index rebounded to 54.7 in October up from the three-year low of 52.6 in September. The data shows that any weakness in the industrial economy, stemming from the US — China trade dispute, has not yet spread into the service sector. Good news for the US economy and the dollar.
Today the US economic calendar is sparse. Investors will focus on any trade deal headlines.
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