Canadian Dollar Jumps to Six-Week High as US Oil Inventories Decline

The Canadian dollar rallied to a six-week high on Thursday after the US government reported a bigger-than-expected decline in crude oil inventories. The loonie may also find direction in several key US economic reports, as well as President Donald Trump’s recent meeting with European Union (EU) Commission President Jean-Claude Juncker.

According to the US Energy Information Administration (EIA), US crude stockpiles fell by 6.1 million barrels for the week ending July 20. Gasoline inventories shed 2.3 million barrels, distillate supplies tumbled 100,000 barrels, and US output topped 11 million barrels per day (bpd).
In recent days, the loonie has found support in higher energy prices. This has not been the case throughout the 40% rally over the last 12 months. US and Brent crude futures have been hovering around the key $70 threshold.
On the domestic economy front, there are no data reports scheduled to be released for the remainder of the week. But Canadian investors will be looking south of the border for several releases, including core durable goods orders, which are forecast to advance 0.5%. Traders will also be waiting for Friday’s Advance GDP and UoM Consumer Sentiment numbers.
President Trump met with Juncker on Wednesday to find a conclusion to the EU-US trade spat. The meeting has been deemed a success because both sides agreed to postpone any additional tariffs as negotiations continue, which many say was a major concession by Trump. Although tariffs on European aluminum and steel remain intact, the Trump administration concurred that it will take another look at these measures as the EU imports more soybeans.
Before his meeting, Trump tweeted:

The European Union is coming to Washington tomorrow to negotiate a deal on Trade. I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers, and Subsidies! That would finally be called Free Market and Fair Trade! Hope they do it, we are ready — but they won’t!

This week’s development had some in Canada wondering if the same type of deal could be established soon pertaining to the North American Free Trade Agreement (NAFTA). But these hopes quickly faded after President Trump confirmed he was close to a bilateral deal with Mexico, completely ignoring Canada and their trade disputes.
The US Dollar Index surged 0.20% to 94.42.
The USD/CAD currency pair rose 0.03% to 1.3051 from an opening of 1.3045. The EUR/CAD plunged 0.24% to 1.5265 from an opening of 1.5300.

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