The Canadian Dollar started the week against the US Dollar on a bad note, but eventually picked up to close the week higher. Canadian authorities had been made to believe that the US was to pull out of the North American Free Trade Agreement (NAFTA), which caused the initial slump of the CAD against the US Dollar. However, the commodity-based Canadian Dollar got a boost from the steady climb of crude oil prices to $70 a barrel. This was after the Russian oil minister indicated that oil supplies globally were not yet on a balanced scale, which indicates that any reduction in OPEC production cuts was not on the cards.
The key news for the week is undoubtedly the interest rate decision and accompanying statement and Monetary Policy Report from the Bank of Canada. Chances of a rate hike, which were boosted by a very strong December jobs report, have been boosted to about 60%, up from a 35% chance in December. Furthermore, the late Friday announcement by US President Donald Trump on being open to discussions to extend NAFTA, should give the Loonie a good boost heading into the new week.
The weekly outlook for the CAD is bullish. Economists expect the interest rate to be raised by 25 basis points from its current level of 1.00%. A rate hike which matches or surpasses economists’ expectations will provide a good tailwind for the loonie this week.
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