The Canadian dollar depreciated Monday versus the U.S. dollar. Oil prices fell as higher production from the U.S. is putting downward pressure on prices ahead of the Organization of the Petroleum Exporting Countries (OPEC) meeting on Nov. 30. The production cut agreement between the OPEC and other major producers has added stability to oil prices, but has also opened up the opportunity for Brazil, Canada and the U.S. to increase production.
NAFTA talks are ongoing in Mexico City with comments circling that the talks are close to a standstill as the U.S. is not budging from its "America First" demands, and Canada and Mexico will not introduce a counter proposal to the increase in U.S. content in North American autos. The U.S. could end up losing 24,000 jobs if it stick to its higher U.S. content demands, and it could even be a worse loss if NAFTA is terminated, but that hasn’t stopped American negotiators to stick to their guns.
The loonie started the week under pressure with low oil prices and NAFTA negotiations devoid of any progress. The failure of the German chancellor to form a coalition set off a sell-off in the single currency during the Asian session. Angela Merkel has brushed off her resignation and instead is focused in a new round of elections instead of opting for a minority government.
The USD/CAD gained 0.33 percent on Monday. The currency pair is trading at 1.2812 at the start of a trading week that will be shortened by the American Thanksgiving holiday starting Thursday. There are two big Canadian data releases this week. Canadian wholesale sales will be released on Tuesday, Nov. 21, and later in the week, retail sales will be published on Thursday, Nov. 23, at 8:30 am EST.
The U.S. Federal Reserve will publish the minutes form its November meeting on Wednesday, Nov. 22, at 2 p.m. EST. There will be more clues on where certain policy-makers stand regarding inflation, but the market is still pricing in a 99-percent probability of a U.S. rate hike in December.
Oil prices fell on Monday. West Texas Intermediate prices are trading at $56.18 after opening at around $56.54 in the Asian session. Higher than expected U.S. weekly inventories have offset comments of an extension to the crude output agreement cut by OPEC and other major producers. The current deal expires in March and, while Russia has been supportive, they have remained noncommittal, which is why the meeting next week is so important to see where all producers stand on an extension.
The rise of the USD triggered by German coalition uncertainty was a negative for crude. Saudi Arabia was not in the spotlight this weekend after the events of the past two weeks have consolidated the power of Crown Prince Mohammed bin Salman. Russia and Saudi Arabia remain the core of the production-cut agreement and compliance. If Russia pledges an extension to the deal, it is expected the OPEC members and the other 10 non-OPEC will follow suit.
Market events to watch this week:
Tuesday, Nov. 21
4:05 a.m. AUD RBA Gov Lowe Speaks
6:00 p.m. USD Fed Chair Yellen Speaks
Wednesday, Nov. 22
8:30 a.m. USD Core Durable Goods Orders m/m
8:30 a.m. USD Unemployment Claims
10:30 a.m. USD Crude Oil Inventories
2:00 p.m. USD FOMC Meeting Minutes
4:45 p.m. NZD Retail Sales q/q
Thursday, Nov. 23
4:30 a.m. GBP Second Estimate GDP q/q
8:30 a.m. CAD Core Retail Sales m/m
11:30 a.m. CHF SNB Chairman Jordan Speaks
*All times EDT
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