If you told me that stocks had taken a shovel to the face today, I wouldn’t have bet on Canadian dollar strength but the loonie is the best performer today. And that’s despite weakness in oil and some other commodities.
A few reasons:
- Better US growth numbers yesterday are great news for the US’s largest trading partner
- The Fed remained dovish and that’s negative for the US dollar
- Canada has some cred as a safe haven. The BOC is the most-neutral G7 central bank, the financial system is strong and government finances good
- The loonie is coming off a tough week. Over the past 5 days, USD/CAD rose 200 pips so a 10 pip rebound is hardly notable in the bigger picture
- Month-end oil flows could be giving the loonie a lift
- Canada’s May GDP today was close to expectations +0.4% m/m
Add it all up and there still isn’t much there but it’s enough to underpin the Canadian dollar. Looking ahead, however, the pair has very little stopping it from a test of the June high.
USDCAD daily with 100 dma