The currency market revolves around themes. The theme of the first round of French elections produced a strong upward reaction for the EUR. With the recent reliability woes in polling, markets had expected extremely negative results for the single currency.
The next themes for investors concerning the CAD are very different: crude oil prices (WTI) sliding below $50, the quality of fundamentals in the Canadian economy and trade agreements with the United States. Further to this last point, the Trump administration announced last evening that it would slap a 20% countervailing levy on Canadian softwood lumber exports. Canadian fundamentals will be closely scrutinized this week, with Retail Sales on Wednesday and GDP on Friday. The current weakness of the CAD is attractive for exporters, as it very often allows them to carry out hedging above the budget rates for 2017 and 2018. The USD/CAD pair was 500 points lower in February!
P.S. a slight error occurred in yesterday’s commentary. The Federal Reserve will announce its key rate decision next Wednesday, rather than this Wednesday.
