The Canadian dollar finished the week off on a lower note which was surprising given the better than expected GDP numbers released for m Canada on Friday which shows the loonie is more reliant on some other factors.
The price of oil tumbled on Friday to its lowest level in over a year anf that may have been the reason the Canadian dollar failed to capatilise on positive GDP figures and the fall in oil may have raised doubts in the minds for board members from the Bank of Canada on whether to lift interest rates again next month.
"Although weakness in both WTI and WCS(oil) has tempered expectations for a December Bank of Canada hike, a modest further dose of hikes could be on the agenda in early 2019 if OPEC sufficiently curtails production. But the loonie will track weaker than we earlier thought until that happens," says Avery Shenfeld, chief economist at CIBC Capital Markets.
Even if the Bank of Canada do raise interest rates next month, and follow up with more in 2019 Mr Avery noted that this may be a good opportunity to exit the Canadian dollar as rates may not go as high as earlier predictions
"A couple of hikes in the first few months of 2019 would see the Canadian dollar appreciate, but we see levels below 1.30 as opportunities to sell the loonie, expecting rate hikes to ultimately come in no higher than current implied pricing, and below the BoC’s latest rhetoric which cited a 2.5-3.5% neutral policy rate range," he added.
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