The Canadian dollar is lower versus the greenback as oil prices are falling after comments from the Organization of the Petroleum Exporting Countries (OPEC) meeting in Algiers have put the oil output freeze out of the short term. The CAD touched 6 week lows caught between lower commodity prices and a stronger U.S. dollar but it is moving to trade under the 1.32 price level. The USD has recovered against majors following the first U.S. presidential debate which appears to have tipped the scales in favour of Secretary Hilary Clinton. The market is not looking for a particular candidate but rather the lack of uncertainty. The closer the election polls the higher levels of jitters and less volume in the market, as one candidate appears to pull ahead the market can move on and risk aversion will subside.
Trade was one of the big talking points during the U.S. presidential debate. While both candidates vowed to review all current and future trade deals to the benefit of U.S. jobs overall they send powerful signs about international trade. Bank of Canada (BoC) Governor Stephen Poloz was at the Western Washington University in Bellingham in the U.S. to speak about cross border trade integration and monetary policy. Governor Poloz said the more the world economy integrates through international trade central banks will find it more challenging to maintain inflation targets. Increased integration can make an economy less sensitive to foreign exchange movements and make domestic inflation more dependant on macro economic factors.
US consumer confidence data was released today boosting the USD. MarketPulse senior analyst Kenny Fisher wrote on today’s Consumer Confidence Index:
US consumer confidence numbers are closely monitored by analysts. Stronger consumer confidence often translates into increased spending by consumers, which is vital for economic growth. The CB Consumer Confidence survey continues to point higher, climbing to 104.4 points in September. This excellent release improved upon the August report, which came in at 101.1, above the forecast of 97.2 points. Gold prices have fallen in response to the strong consumer data. The Fed is sure to take note of surging consumer confidence, which could improve the likelihood of a December rate hike.
The USD/CAD lost 0.05 percent in the last 24 hours. The pair is trading at 1.3238 after the end of the first presidential candidate debate in the U.S., the oil producers meeting in Algiers and the stronger U.S. consumer confidence index. The CAD is stable above the 1.32 price level as it is caught between the downward pressure of commodity prices, but sustained by the strong trade relationship with the U.S.
Bringing attention to Canada’s housing woes was the UBS bubble index. Vancouver made number one of the world’s most expensive housing markets with London in the United Kingdom a close second. The main difference from last year’s report to this one is that in 2015 there were two cities that qualified as “bubbles” now the number is up to six: Vancouver, London, Stockholm, Sydney, Munich and Hong Kong. The BoC has been vocal in their warning about the Canadian real estate market so its no surprise to see Vancouver as severely overvalued. Local government has started to limit the amount of foreign buyers that keep pushing house prices upward. So far its not clear if this strategy will result in less frothy prices without the need of a hard correction.
The price of West Texas dropped 2.869 percent in the last 24 hours. The WTI is trading at $44.25 after several comments from OPEC and non-OPEC energy ministers present at the Algiers meeting. The road to the informal meeting between large energy producers has been rocky. The first attempt at an oil output freeze was in March at the Doha summit and ended by Saudi Arabia exposing a rift between Iran and the rest of the organization. Last week both nations met at a meeting to smooth their differences, but after a statement from the Iranian energy minister Bijan Zanganeh made clear the goal is to reach 4 million barrels per day. Post sanction Iranian production stands at 3.6 million barrels. Russia had already dismissed the chance of oil production cuts and now it is clear that even a freeze might be out the question for this meeting. Energy insiders had hinted that Algiers would not deliver a final agreement, but rather push that announcement in the next OPEC general meeting. Now it seems the future meeting will be ground zero for ongoing discussions about production levels.
Tomorrow the OPEC meeting continues with few surprises or deals expected after the comments from various energy ministers. The U.S. oil inventories will also play a big part on the price of oil after the massive 6.2 million unexpected drawdown last week.
Market events to watch this week:
Tuesday September 27
OPEC meeting in Algiers
10:00am USD CB Consumer Confidence
Wednesday, September 28
OPEC meeting in Algiers
8:30am USD Core Durable Goods Orders m/m
10:30am USD Crude Oil Inventories
Thursday September 29
2:35am JPY BOJ Gov Kuroda Speaks
8:30am USD Final GDP q/q
8:30am USD Unemployment Claims
4:00pm USD Fed Chair Yellen Speaks
9:45pm CNY Caixin Manufacturing PMI
Friday September 30
4:30am GBP
Current Account
8:30am CAD GDP m/m
9:00pm CNY Manufacturing PMI
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar
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Alfonso Esparza
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
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