Loonie Shows Good Performance Despite Adverse Fundamentals

The Canadian dollar fared rather well today, rising against other most-traded currencies or at least staying flat against them. The notable exceptions were the US dollar and the Japanese yen. Losses versus the strong greenback were especially big. But overall, the loonie showed a rather decent performance considering negative macroeconomic data and falling prices for crude oil.
Crude oil rallied yesterday on fears of supply disruptions that could be caused by a potential war between the United States and Iran. But today, traders were more courageous, believing that a full-blown war is unlikely. As a result, risk premium went off the market, causing oil prices to reverse their gains. That was bad news to the Canadian currency, which usually closely follows prices for crude.
Statistics Canada reported that the trade balance deficit shrank from C$1.6 billion in October to C$1.1 billion in November. But the deficit was still bigger than the median forecast of a C$0.8 billion gap. And on top of that, the reasons for the decline were not good: both imports and exports fell, it is just that imports were falling faster than exports. Exports fell by 1.4%, while imports dropped by 2.4%.
USD/CAD climbed from 1.2963 to 1.3002 as of 20:04 GMT today, though the pair retreated from the session maximum of 1.3029. EUR/CAD dropped from 1.4513 to 1.4492. GBP/CAD was little changed at 1.7061.

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