​VBCE Weekly Foreign Exchange Wrap Up for Nov. 28 – Dec. 2, 2016

Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca

The CAD was the best performing currency along with the GBP this week as markets cheered the OPEC agreement to cut daily oil production by 1.2 million barrels. Oil gained nearly 15% about $1 shy of an 18 month high. The CAD reached multi-month highs vs. the EUR, JPY, and AUD. Moves lower in USDCAD were generally met with good buying interest over the course of this week with noticeable intra-day "bounces." After Friday's jobs report, USDCAD tested the 1.3256 level – a 5 week low before finishing the week just below the 1.33 level.

Weekly Open

Low

High

Weekly Close

USDCAD

1.3525

1.3256

1.3535

1.3288

EURCAD

1.4328

1.4380

1.4137

1.4160

GBPCAD

1.6877

1.6624

1.6978

1.6902

JPYCAD

0.01195

0.01207

0.01164

0.01170

AUDCAD

1.0069

0.9854

1.0092

0.9910

Themes for the week:

*CAD and GBP best performing currencies

*EUR and JPY declines continue – holding near 1 year low / 7 month low respectively

*Oil surges 15% - from $45.08 up to $51.70 as OPEC agrees on 1.2 million barrels / day in production cuts

*U.S. GDP Q3: 3.2% (exp 3.0% / prev 2.9%)

*Canada GDP (Sept): 0.3% (exp 0.1% / prev 0.2%)

*Canada GDP Q3 annualized: 3.5% (exp 3.4% / Q2 revised from -1.6% to -1.3%)

*Canada net employment change: 10,700 (exp. -20,000 / prev 43,900)

*Canada unemployment rate: 6.8% (exp 7% / prev 7%)

*U.S. non-farm payrolls: 178,000 (exp 175,000 / prev revised from 161,000 to 142,000)

*U.S. unemployment rate: 4.6% (exp 4.9% / prev 4.9%)

*U.S. average hourly earnings: -0.1% (exp 0.2% / prev 0.4%)

*U.S. Fed funds probability for Dec. rate hike now at 97.2% (and 1 – 2 hikes for 2017)

On Tap for Next week:


Sunday, Dec. 5: Italian Referendum: A "No" vote would see PM Renzi resign and have negative short-term implications for the EURO
Tuesday, Dec 6: Canada trade deficit: exp $2.0 billion / prev $4.08 billion

U.S. trade deficit: exp $41.60 billion / prev $36.40 billion

Australia central bank interest rate: exp. 1.50% / prev. 1.50%

Wednesday, Dec. 7: Bank of Canada interest rate: exp 0.50% / prev 0.50%

Thursday, Dec. 8: European Central Bank interest rate: exp 0% / prev 0%

The CAD has benefitted from the surge in oil prices this week but not necessarily to the degree the market is accustomed to. All major Canadian banks are forecasting higher USDCAD rates for 2017 (from 1.33 to 1.45) and are recommending to buy USD on dips. In the near term, the CAD could see further gains but there is always the risk of a quick reversal higher as broad USD positive sentiment continues to evolve. The Bank of Canada is expected to re-affirm its neutral position on interest rates at the 7:00am announcement next Wednesday.

Topside targets to consider: 1.3315, 1.3440, 1.3495, 1.3535

Downside targets to consider: 1.3255, 1.3225, 1.3115, 1.3010

Sources: Reuters, Bloomberg, FXStreet, RBC Capital Markets, Bank of Canada, U.S. Federal Reserve, CNBC, Forexlive, CMEGroup

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The information and opinions contained herein are gathered from sources which are thought to be reliable but the reader should not assume that the information and opinions are official or final. VBCE makes no warranty concerning the accuracy of the information and opinions, and accepts no liability for the consequences of any actions taken on the basis of the information and opinions provided. The content is for general information only and does not constitute in anyway giving financial advice.