Canadian dollar diverges from energy prices
2024-04-08
Summary:
April 8 CAD was near a 4-mo low. Weak job data may lead to a BoC rate cut. Oil falls, USD strength presses, and CAD falls. Resistance is at 1.3430.
The Canadian dollar was trading around a four-month low on Monday as investors raised bets the BOC would begin cutting interest rates in June following weaker-than-expected jobs data.
Canada's economy shed 2.200 jobs in March, missing estimates for a gain of 25.000. while the jobless rate increased to a new 26-month high of 6.1%. Now markets see a 75% chance of cuts in Q2.
Oil prices tumbled nearly 2% in another blow to loonie. Middle East tensions eased after Israel withdrew more soldiers from southern Gaza and committed to fresh talks on a potential ceasefire.
Goldman Sachs analysts expect Brent to stay below $100 in its base case scenario that assumes already solid demand, easing geopolitical tensions and that elevated spare capacity will lead OPEC+ to raise output in Q3.
Loonie has lost 2.6% this year despite surging oil prices. The gap between Canada's 2-year yield and the US equivalent widened to 53 bps in favor of the US note, its widest since 26 Feb.
A strong US employment report on Friday helped underpin the US dollar’s strength. The country added 303.000 jobs last month, far more than expected and the 39th straight month of gains.
The Canadian dollar has largely moved sideways since February. It proved to be hard to weak below 1.3600 per dollar but the resistance area is acting to prevent any future rebound beyond 1.3430.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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