Canadian Dollar (CAD) Gains Despite Sliding Oil Prices, FOMC Announcement Ahead

Despite the fact that the price of crude oil, Canada’s main commodity, fell to its lowest levels of 2015 this week, the Canadian Dollar was able to gain on several of its peers ahead of the Federal Open Market Committee policy meeting. Divided opinions as to whether the central bank will adopt a hawkish or dovish tone in this month’s statement lent support to several higher risk peers initially, although the US Dollar strengthened as the week progressed.

According to one industry expert; ‘With the labour market still evidently on fire in February, we expected the FOMC statement... to omit the language that the Fed can be ‘patient’ in beginning to normalise monetary policy. Even with the headline inflation below zero, we then anticipated a first hike in June, with the FOMC pushing the target range for the Feds fund rate to 1% to 1.25% by the end of this year and 2.75% to 3% by end-2016.’

Canadian International Securities Transactions were also shown to have risen in January, climbing from a revised -13.54 billion in December to 5.73 billion. However, demand for the ‘Loonie’ was undermined as the week progressed and Canada’s Manufacturing Shipments report showed a -1.7% decline in January, month-on-month. A slightly shallower dip of -1.2% had been forecast. December’s figure was negatively revised to 1.6%. As stated by the Wall Street Journal; ‘the value of factory sales declined in 14 of the 21 sectors [Statistics Canada] tracks in January, led by a price-induced 11.9% drop in petroleum and coal products, to 4.94 billion Canadian Dollars. That was the lowest level since May 2009. On a 12-month basis, sales in this category dropped 30.5%. Refined petroleum accounts for roughly 90% sales in this category’.

On Wednesday the Canadian Dollar was trading against the Pound in the region of 0.5320 having posted a notable gain following the publication of disappointing UK wage data. The ‘Loonie’s advance was limited however as Canadian Wholesale Sales fell by -3.1% in January, month-on-month following a 2.8% gain in December. A fall of -0.8% had been forecast. The Canadian Dollar to US Dollar currency pair was trending in the region of 0.7803, down -0.15% on the day’s opening levels. With the FOMC announcement still to come, we can expect further Canadian Dollar volatility to occur in the hours ahead.