The US dollar advanced versus the Canadian dollar for a second consecutive week last week. The pair climbed 0.7% to close the week at 1.3229. The pair holding steady in early trade on Monday.
Let’s take a look at the factors that have been driving the pound US dollar exchange rate across the week.
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The US dollar trended higher across the board in the previous week. Strong US service sector data calmed concerns over the health of the US economy and dampened bets for further easing from the Fed. The US manufacturing sector has slumped amid the ongoing US — China trade dispute. However, there are no signs of this spilling over into the dominant service sector.
Trade headlines also supported the dollar across the previous week. Reports that the US and China were inching towards signing a trade deal and rolling back already implemented trade tariffs lifted the US dollar.
Trade news will remain a key driver for the dollar this week. US inflation and Fed Chair Jerome Powell’s testimony before Congress on Wednesday and Thursday will also be watched closely.
Canada Unexpectedly Loses Jobs
The Canadian dollar booked substantial losses versus its US dollar rival across last week. Soft Canadian unemployment data exasperated the Canadian dollar’s decline on Friday. 1800 jobs were lost in the country in October, wildly missing the 15,900 jobs that analysts had predicted had been created. The construction and manufacturing sectors were worst hit, although the unemployment rate stayed steady at 5.5%.
Canadian data was also disappointing in the week with the Ivey PMI falling and building permits also on the decline. Despite the worsening picture, the Canadian central bank has not moved on interest rates since October 2018, even as central banks across the globe have cut rates, including the Federal Reserve. However, in the latest Bank of Canada monetary policy meeting at the end of October, the central bank left the door open to possible future cuts. This weighed on demand for the dollar.
Finally, the price of oil also acted as a drag on the Loonie at the end of the week. Despite oil reaching a six-week high earlier in the week, oil ended the week with losses following large builds in US crude stockpiles and reports that OPEC would not cut rates further in when they meet in December. The value of the Canadian dollar versus US dollar is directly correlated to the price of oil. When oil declines so too does the Canadian dollar.
There is no high impacting Canadian data due at the start of the week. Oil prices could drive the Canadian dollar.
