Never miss a story from Daniel Dubrovsky

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Daniel Dubrovsky

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

CAD Price Chart

Canadian Dollar Fundamental Forecast: Neutral

  • Canadian Dollar gained as relatively dovish Fed boosted stocks and crude oil prices
  • Focus next week shifts to economic data with US-China trade deal pushed back for now
  • Both local and US economic data may beat estimates, S&P 500 might struggle to rise

Have a question about what’s in store for Canadian Dollar next week? Join a DailyFX Trading Q&A Webinar to ask it live!

The Canadian Dollar rose this past week as a relatively dovish Fed sunk the US Dollar, boosted stocks and crude oil prices. At home, the Loonie didn’t spend much time noticing a better-than-expected GDP report. Despite the beat in the YoY rate for November 2018 (1.7% versus 1.6% expected), growth was at its slowest in two years. The MoM one contracted 0.1% which was in-line with estimates.

Probabilities of a Bank of Canada hike simultaneously dropped after the cautious tone from the FOMC meeting. Overnight index swaps were pricing in a 15.9% chance of a BoC hike by July 2019, down from almost 40% confidence at the beginning of this past week. Yet, the Loonie still stood relatively strong, which speaks directly to what it was focusing in the interim: sentiment.

There has been a noticeably strong inverse correlation between USD/CAD and both the S&P 500 and crude oil since October. The latter two have spent most of January recovering as markets grew doubtful of a hawkish Federal Reserve and optimistic about a deal between the US and China to end the trade war. With an outcome on the latter being pushed back for the “near future”, the focus shifts to economic data.

After all, both the Fed and the BoC are quite data-dependent and arguably the most hawkish of the major central banks (albeit that has diminished somewhat as of late). Next week contains Canadian employment data. Economic statistics out of the country has been tending to outperform relative to economists’ expectations, opening the door to an upside surprise.

The same also holds true in the United States. As such, the first estimate of Q4 GDP and PCE core (the Fed’s preferred measure of inflation) may also surprise better. With that in mind, the Canadian Dollar fundamental forecast will look neutral. On a side note, the S&P 500 and market sentiment could be running out of room to keep rallying which may reverse gains in oil prices and bode ill for CAD down the road.

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

Other Weekly Fundamental Forecasts:

Australian Dollar Forecast - Australian Dollar Could Wilt If Focus Returns To Interest Rates