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Forex News: Canadian Dollar Drops Amid Falling Oil Prices

Canadian Dollar Drops Amid Falling Oil Prices

07/11/2017 - 09:11:00 (RTTNews)

(RTTNews) - The Canadian dollar weakened against its major counterparts in the European session on Tuesday, as oil prices fell and investors await the Bank of Canada decision due tomorrow, which is widely forecast to raise benchmark rate for the first time in nearly seven years.

Crude oil fell ahead of U.S. inventories data that may show dwindling supplies for the second consecutive week.

Crude for August delivery dropped $0.41 to $43.99 per barrel.

Despite low oil prices, a sharp increase in spending by U.S. shale producers has led the global recovery in oil investment, said the International Energy Agency.

"The largest planned increase in upstream spending in 2017 in percentage terms is in the United States, in particular in shale assets that have benefited from a reduction in breakeven prices as a result of a combination of improvement in costs and efficiency gains," the IEA said.

The BoC meets tomorrow, with economists forecasting it to deliver a 25 basis-point rate hike to 0.75 percent. The rate has been kept unchanged at 0.50 percent since 2015.

Sentiment was subdued as investors awaited the U.S. earnings season as well as the testimony from Fed chair Janet Yellen this week for clues on the timing of the next U.S. rate hike.

Data from Canada mortgage and housing Corp. showed that Canada housing starts rose more-than-forecast in June.

The seasonally adjusted annual rate of starts were 212,695 units in June, up from 194,955 units in May. Economists had forecast an increase of 200,000 units.

The loonie showed mixed performance in the Asian session. While the loonie fell against the greenback and the aussie, it held steady against the euro. Against the yen, it rose.

The loonie dropped to 4-day lows of 0.9839 against the aussie and 1.4747 against the euro, from its early highs of 0.9800 and 1.4673,respectively. Continuation of the loonie's downtrend may see it challenging support around 1.00 against the aussie and 1.50 against the euro.

The loonie retreated to 88.46 against the yen, from a 7-month high of 88.84 hit at 3:00 am ET. If the loonie-yen pair extends decline, 86.00 is likely seen as its next support level.

Data from the the Bank of Japan showed that Japan's M2 money stock rose 3.9 percent on year in June, coming in at 976.6 trillion yen.

That was in line with expectations and up from the downwardly revised 3.8 percent increase in May.

Reversing from an early high of 1.2885 against the greenback, the loonie edged down to 1.2926. Next likely support for the loonie may be found around the 1.31 region.

Looking ahead, U.S. wholesale inventories for May are due shortly.

At 12:30 pm ET, the Federal Reserve Governor Lael Brainard speaks about normalizing central banks' balance sheets at a conference jointly sponsored by Columbia University and the Federal Reserve Bank of New York.

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