The Canadian dollar weakened versus its US dollar counterpart at the start of the new week. The Canadian dollar extended losses from the previous week, dropping a further 0.16% on Monday to close on at 1.3306. The pair is holding steady in early trade on Tuesday.
The US dollar traded broadly lower versus its peers in the previous session, just less so than the Canadian dollar. The greenback was under pressure following the release of dismal US manufacturing data. The manufacturing sector contracted for a fourth straight month in November, raising concerns over the health of the US economy amid the ongoing US — China trade dispute.
Trade was very much in focus on Monday as China said the US military were not welcome in Hong Kong in retaliation for Trump signing the Hong Kong bill into law. Raised tensions between the two powers since Trump showed support for anti-government protesters have dented optimism of a phase one trade deal being achieved soon.
Trump also announced tariff on base metal imports from Argentina and Brazil. Furthermore, Trump is threatening the EU with tariffs over the illegal Airbus subsidy. The prospect of trade wars on so many fronts unnerved US dollar investors sending the dollar lower.
Today there is little in the way of economic data. Trade developments are expected to drive the dollar.
Canadian Dollar Drops Ahead Of Wednesday’s BoC Rate Announcement
The Canadian dollar trended lower amid concerns over the potential escalation of the trade conflict, and as investors looked ahead to the Bank of Canada’s monetary policy announcement later in the week.
The BoC is broadly expected to leave monetary policy unchanged at 1.75%. The central bank has resisted cutting interest rates whilst central banks across the globe implement monetary policy easing. However, the BoC has expressed concern about global trade uncertainty. The more dovish stance adopted by the central bank has pressurised the Loonie since October. Analysts don’t expect to see demand for the Canadian dollar pick up prior to Wednesday’s announcement.
The Canadian dollar was on the back foot even as oil prices rallied. West Texas Intermediate gained over 1.4% across the previous session, supported by stronger than forecast Chinese manufacturing data and hints that OPEC would agree to deepen output cuts at its meeting this week. A rally in oil often lifts the commodity sensitive Canadian dollar. However, that wasn’t the case on Monday.
Today investors will be watching American Petroleum Institute’s weekly crude stock report. Analysts are expecting a build of 3.9 million barrels. A lower figure could help lift the price of oil and the Canadian dollar.