The Canadian dollar weakened slightly against its U.S. counterpart on Monday, sticking to a narrow range as oil prices fell and investors awaited the signing this week of a preliminary trade deal between the United States and China.
At 3:43 p.m., the Canadian dollar was trading 0.1 per cent lower at 1.3057 to the greenback, or 76.59 U.S. cents. The currency, which last Thursday hit a near two-week low intraday at 1.3104, traded in a range of 1.3032 to 1.3068.
“It’s like watching paint dry today,” said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. “The market doesn’t really have any reason to move until Wednesday. The U.S-China phase 1 signing is probably the event of the week.”
Optimism about the deal’s expected signing boosted stocks on Wall Street. Canada runs a current account deficit and is a major exporter of commodities, including oil, so its economy could benefit from an improved outlook for the global flow of trade or capital.
Canadian business concerns around trade tensions have declined and sentiment is “broadly positive,” the Bank of Canada’s quarterly business survey disclosed on Monday.
The survey could encourage the central bank to leave interest rates on hold at the Jan. 22 policy announcement despite evidence in recent weeks of sluggish domestic economic growth.
“I don’t see enough of a reason for the Bank of Canada to get excited and change the monetary policy outlook,” Bregar said.
Chances of a rate cut by July are at less than 50 per cent, money market data showed.
The price of oil fell as Middle East tensions eased and investors turned their focus to lackluster seasonal demand following last week’s bearish U.S. report showing large fuel stock builds. U.S. crude oil futures settled 1.6 per cent lower at $58.08 a barrel.
The loonie declined 0.4 per cent last week, after it notched a 5 per cent gain in 2019, when it was the top-performing G10 currency.
Speculators have more than doubled their bullish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of Jan. 7, net long positions had increased to 26,367 contracts from 11,913 in the prior week.
Canadian government bond prices were lower across a steeper yield curve, with the two-year down 2 cents to yield 1.666 per cent and the 10-year falling 25 cents to yield 1.615 per cent.
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