The Canadian dollar depreciated on Monday after oil prices fell more than 1 percent at the start of the week. Higher supply in North America and concerns about Russia’s commitment to the OPEC production cut agreement have lowered energy prices after they touched two-year highs. The fall in energy prices affected the loonie as the correlation between the two is resurfacing.
The Bank of Canada will release its Financial System Review on Tuesday, Nov. 28, at 10:30 a.m. EST. U.S. Federal Reserve members will also feature heavily this week, with Chair nominee Jerome Powell due to testify before the U.S. Senate at 10 a.m. EST on Tuesday.
The Bank of Montreal released a report on the impact of NAFTA ending, with the impact to Canada about 1 percent of GDP. Inflation would rise given the potential weak loonie and pricier imports could put pressure on the Bank of Canada to raise rates. After the fifth round of talks ended in Mexico City there was a sense that little progress has been made. The end of the year is fast approaching and with the new year will come presidential elections in Mexico and the U.S. primaries adding more uncertainty to an already dicey negotiation. The next round of talks will happen in Washington on Dec. 11.
The USD/CAD gained 0.52 percent on Monday. The currency pair is trading at 1.2769 as the U.S. dollar managed to get a leg up after a short holiday week had the greenback on the backfoot. The negative impact on the U.S. tax reforms issues remains when talking about the JPY but against all the other majors, the USD appreciated. Friday, Dec. 1, will be a busy week for CAD traders. Statistics Canada will release the monthly GDP figures as well as the employment report both at 8:30 a.m. EST. GDP is expected to have shrunk by 0.1 percent and there is some anxiety on the job front as the first ADP job report for Canada showed a loss of 5,700 in October.
Oil prices fell at the beginning of the week. The price of West Texas Intermediate is trading at $57.65 after the Keystone pipeline will restart operations on Tuesday and doubts about Russia’s willingness to extend the OPEC production-cut agreement, put pressure on crude prices.
Oil ministers will meet in Vienna on Thursday, a year after a deal was reached to reduced crude production to stabilize prices by the Organization of the Petroleum Exporting Countries (OPEC). Russia and other major producers joined the agreement in December, and have already extended the deal until March of 2018, but the likely outcome from the meeting in Vienna is a second extension. The main topic of debate is for how long, as different timelines have been discussed. Russia has taken the leadership position in a time when Saudi Arabia is opening too many fronts in the diplomatic arena.
The mercurial nature of OPEC members has already resulted in failed summits in the past, but it appears that Russia is seen as a conciliatory third party that could push through an extension. Russia was slow to comply with the cuts, and might not be as willing to go for a full nine-month extension this time around.
Market events to watch this week:
Tuesday, Nov. 28
2:00 a.m. GBP Bank Stress Test Results
10:00 a.m. USD CB Consumer Confidence
11:15 a.m. CAD BOC Gov Poloz Speaks
3:00 p.m. NZD RBNZ Financial Stability Report
Wednesday, Nov. 29
All Day All OPEC Meetings
8:30 a.m. USD Prelim GDP q/q
10:30 a.m. USD Crude Oil Inventories
7:00 p.m. NZD ANZ Business Confidence
7:30 p.m. AUD Private Capital Expenditure q/q
Thursday, Nov. 30
8:30 a.m. USD Unemployment Claims
Friday, Dec. 1
4:30 a.m. GBP Manufacturing PMI
8:30 a.m. CAD Employment Change
8:30 a.m. CAD GDP m/m
10:00 a.m. USD ISM Manufacturing PMI
*All times EDT
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