USD/CAD Canadian Dollar Lower After Oil Glut Keep Prices Down

The Canadian dollar started the week trading lower against its American counterpart. The failed Coup in Turkey built energy price anxiety that dissipated as the country did not suffer more than a short term shock as the political institutions regained power. The drop in oil prices as the potential disruption of Turkish ports never materialized illustrates the effects of lingering oversupply as producers have not considerably cut down their output despite soft prices.

Foreigners bought CAD 14.73 billion in Canadian securities in May. Net inflows poured into Canada despite yearly highs of equity purchases by Canadians. The AAA rating of Canadian sovereign debt has made it a popular destination in the current low rate environment.

Canadian stocks benefited from the enhanced risk appetite with only the energy sector showing losses as the price of oil fails to gain traction in a low demand high supply world. U.S. stocks recovered from earlier losses and are on track for a record high close after earning reports continue to impress.

The USD/CAD gained 0.24 percent in the last 24 hours. The pair is trading at 1.3003 after energy prices stopped their fall and boosted the CAD. The loonie has benefited from market stability following the Brexit shock. The quick U.K. Prime Minister replacement and strong U.S. economic indicators have stoked the appetite for risk amongst investors. Crude and CAD correlation is still high so a drop in prices is keeping the Canadian currency down versus other majors.

The West Texas Oil lost 2.778 percent in the last 24 hours. The pair is trading at $44.82 after news of the failed coup in Turkey got crude to focus on supply and demand dynamics. The oversupply still dominates concerns of traders as there are signs of a global growth slowdown while producers keep output near record levels and the Organization of the Petroleum Exporting Countries (OPEC) does not seem unified enough to influence prices.

Gold is rangebound between $1,335 and $1,328 as its appeal as a safe haven is reduced, yet bargain hunters have swooped in when a sell off materializes and drive the yellow metal higher. The XAU/USD lost 0.637 percent in the last 24 hours. The pair is trading at 1328.95 as macro headwinds subside, but with so much uncertainty hanging over markets it is not expected to give up much ground.

Canadian data will be scarce this week with the highlights coming on Friday, July 22 with the release of inflation and retail sales data. Globally the European Central Bank (ECB) rate statement on Thursday, July 21 is heavily anticipated although the market widely expects President Mario Draghi to keep policy unchanged awaiting more data around the Brexit vote and the impact of its own quantitative easing program before digging deeper into the unconventional monetary policy toolbox.

Thursday, July 21
8:30am CAD Wholesale Sales m/m
Friday, July 22
8:30am CAD Core CPI m/m
8:30am CAD Core Retail Sales m/m
8:30am CAD CPI m/m
8:30am CAD Retail Sales m/m
Saturday, July 23
Day 1 ALL G20 Meetings

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