Robust Wholesale Sales Data Propel Canadian Dollar

Robust Wholesale Sales Data Propel Canadian Dollar
June 27, 2019

 

The Canadian dollar started strengthening midweek against the greenback as wholesalers posted their quickest two-month gain in nearly four years, while crude oil prices continued to remain bullish. The Canadian dollar’s appreciation was limited on the heightening diplomatic and economic tensions between Canada and China. From a high of 1.3196, the USD/CAD pair declined to a low of 1.3109 in the past 24 hours.

Statistics Canada has reported that sales (wholesale) grew 1.7% in April, an increase from 1.4% in the earlier month. That reflects the best monthly gain since 2016 and the fifth successive month of gains. Notably, the inventory to sales ratio decreased to 1.39 in April, a decline from 1.40 in the earlier month. Almost all the sectors performed well. However, vehicle and auto parts sales, which grew at 3.2% in April, after a 1.9% decline in March, mainly contributed to the impressive sales growth.

The Canadian dollar also gained from bullish crude oil prices, which have rallied in four of the past five trading sessions. Overall, crude has gained roughly 10% in the past week to close at $59.11 per barrel yesterday. Likewise, West Texas Intermediate oil futures jumped to $65.40 a barrel. Since crude contributes a major share of Canada’s revenue, any considerable change in crude prices increases the volatility of the Canadian dollar.

Relations between Canada and China took a step back when Beijing announced a suspension of meat imports. China, the second largest economy, decided to terminate imports after it found traces of ractopamine, a veterinary drug and feed additive, in pork products imported from Canada.

It is bad news for the Canadian farmers because almost 20% of their meat exports reach Chinese ports. Notably, China banned the import of another Canadian product, Canola, a week back. Jim Carr, Minister of International Trade Diversification, has affirmed that a probe has begun on the matter. He also said that financial assistance for the industry is being considered as well. However, Carr prefers to identify the real cause of the problem as early as possible in order to resolve the issue and begin shipments again.

Carr, however, brushed away a perceived link between the import ban and tensions with China on the arrest of Huawei CFO Meng Wanzhou. Beijing has time and again demanded the release of the daughter of Ren Zhengfei, founder and CEO of Huawei, arrested on December 1st and presently under house arrest in her Vancouver mansion.

The upbeat economic data and crude oil rally are expected to keep the loonie bullish in the short-term.

Technically, the USD/CAD pair is trading below its 50-day moving average. Additionally, the momentum indicator is making new lows. As a result, we can expect the currency pair to move down in the short-term.

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


Related Articles

Aussie Remains Weak on Posting 0.5% GDP Contraction

  The unexpected boom in the commodity prices enabled the Australian dollar to rally against all other currencies including the

Pound Remains Volatile On Brexit Uncertainty

  The sterling pound traded yesterday in a wide range versus the greenback, led by Brexit related news, while the

Loonie Strengthens as Crude Rallies Above $50 per Barrel

  A slowdown in inflation and a decline in the price of crude oil kept the Canadian dollar in a