The Canadian dollar weakened against its US counterpart on Thursday as the solid greenback and falling energy prices weighed on the commodity currency ahead of the September 20 election.
Canada is the world’s fourth largest exporter of oil, declining as the US storm threat recedes. US West Texas Intermediate (WTI) crude futures were trading 0.92% lower at $71.96 a barrel. Lower oil prices lead to lower U.S. dollar revenue for Canadian exporters, resulting in a reduced value of the loonie.
In addition, Canada’s Statistics Canada reported that wholesale sales fell 2.1% to $70.1 billion in July as sales of building materials and supplies plummeted. In total, it was the second consecutive decline and the largest since April 2020. That worries investors that the economy is slowing.
“Short-term, CAD faced some headwinds. Economic data momentum has turned negative. The softening of incoming data coupled with the impending election (September 20) means that BoC messages are likely to be neutral in the near term,” Citi analysts noted.
“However, from our medium term view, given Canada’s high vaccination rate, more lockdowns seem highly unlikely, and economic data should come in stronger as we move away from 2Q prints. Canada is also likely to see more fiscally after the election.”
The dollar index, which measures the value of the dollars against six foreign currencies, traded 0.37% higher at 92.892. On Thursday, August retail sales data showed an unexpected increase, allaying some concerns about slowing economic growth that supported the greenback.
It is very likely that the world’s dominant reserve currency, the U.S. dollar, is set to rise towards the end of the year, largely due to the Fed’s expectation of two rate hikes in 2023. dollars strengthening and a possibility that the Federal Reserve will raise interest rates sooner than expected, the USD / CAD couple may experience a rise.
This article was originally posted on FX Empire