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USDCAD Firm on Poloz, Profit Taking, Oil

Published December 16, 2016
  • Bank of Canada Governor Stephen Poloz spoke more on Canadian housing risks yesterday, stating that new federal housing finance rules will slow down the overheated real estate market, however, household debt remains at extremely high levels
  • Poloz was also optimistic in stating that the period of danger and adjustment from lower oil prices has appeared to have passed and feels the increase in global borrowing since the U.S election will be manageable for the Canadian economy
  • In regards to Canadian monetary policy, Poloz appeared to be more confident that inflation would rise to the target level, suggesting easing is not likely in the near term
  • The US Dollar slowed down after yesterday’s post-Fed rally as investors opted to take profits from the USD this morning; Housing Starts and Building Permits came in slightly weaker than expected
  • Euro showed some relief as the USD weakened; German Bundebank President, Jens Weidmann, also reasserted that regional monetary authorities were not responsible for fostering growth, putting the onus upon politicians to pick up the slack
  • Oil prices recovered slightly from yesterday’s losses as producers in the Middle East were informing buyers of upcoming supply cuts as part of the recent OPEC deals
  • The market now waits on more details as to how OPEC's decision to cut output will change international trade flows of the world’s most important commodity (Chart 1)
  • Investors also look to the latest Baker Hughes’ data on the number of rigs activity for shale producers in the United States; last week saw a number of active rigs jump from 477 to 498 

Chart: (1) Global Oil Flows