The Canadian dollar continued to advance versus the US dollar on Tuesday. The price of oil rebounded after losses on Monday following the rift between Qatar and a host of Arab nations accusing the middle eastern country of supporting terrorism. The USD is still struggling under heightened political risk with the upcoming testimony of former FBI director James Comey on Thursday.
Canadian economic data was softer with the Ivey PMI disappointing with a 53.8 reading after a 62.4 reading in April. Economic activity across all sectors in Canada came in below expectations of a flat reading of 62. The employment component is showing signs of cooling and supplier deliveries fell into contraction at 44.6. Next up in the Canadian economic calendar is the release of Building permits on Wednesday, June 7 and Housing starts and NHPI on Thursday, June 8.
Housing data has been given more priority as there appears to be an impact to the latest efforts from the government to cool down a real estate bubble. Prices in Toronto have been reported to have grown at a lower rate than last year, although there are signs that Vancouver might be heating up again. Canada’s benchmark rate sits at record low 0.50 percent with no hike in sight for 2017.
The USD/CAD lost 0.179 in the last 24 hours. The currency is trading at 1.3450 with the US dollar still under pressure from political risk. Disappointing employment data on Friday and an underwhelming ISM non-manufacturing PMI on Monday (56.9) have not derailed the market’s expectations of a U.S. Federal Reserve rate hike on June 14. The CME FedWatch tool is still showing the probability of higher Fed funds rates at higher than 95 percent.
Former FBI Director James Comes testimony on Thursday, a day already full of uncertainty due to the UK elections, could shock the White House. The uncertainty of the outcome is putting downward pressure on the USD. Reports from ABC news are saying Comey will not accuse the President of obstruction of justice, but until the testimony is not done there is little to rule out. Trump for his part said that his tax and health care reforms are coming, and renewed his pledge to build a border wall.
Oil prices gained 1.628 percent on Tuesday. The price of West Texas Intermediate is trading at $48.01 after Monday’s drop on the back of the diplomatic rift between Qatar and a host of Arab nations. The turmoil between Organization of the Petroleum Exporting Countries (OPEC) members could spell the end of price stability after the group partnered with Russia and other major non-members to cut production until March 2018.
The Energy Information Administration (EIA) reported on Tuesday that US crude production will reach 10 million barrels a day in 2018 breaking a record that stood since 1970. Higher US production has keep oil prices lower as rig counts have doubled in the last 12 months.
Gold has gained 0.983 percent in the last 24 hours. The yellow metal is trading at $1,292.19 as geopolitical tensions are driving risk aversion higher around the world. The rift between Qatar and other Arab nations, UK elections and the testimony of the former FBI director on Thursday have gold bid. The European Central Bank (ECB) is also scheduled to deliver its monetary policy statement on the same day. Thursday will be a key day for gold traders as trends could quickly reverse once the biggest uncertainties in the market are resolved, or it could lead to higher prices if Brexit and US impeachment risks are higher at the end that day.
Market events to watch this week:
Wednesday, Jun 7
10:30am USD Crude Oil Inventories
9:30pm AUD Trade Balance
Tentative CNY Trade Balance
Thursday, Jun 8
All Day GBP Parliamentary Elections
7:45am EUR Minimum Bid Rate
8:30am EUR ECB Press Conference
8:30am USD Unemployment Claims
Friday, Jun 9
4:30am GBP Manufacturing Production m/m
8:30am CAD Employment Change
8:30am CAD Unemployment Rate