The Canadian dollar is weakening against a basket of currencies midweek as the price of US crude oil cratered as much as 5%. With oil officially sliding into a bear market, the loonie is paring a portion of its year-to-date gains. As economic data continues to be mixed, it might be a difficult second half for the currency.
On Wednesday, the US Energy Information Administration (EIA) reported that weekly US crude supplies surged by 2.4 million barrels for the week ending August 2. This surprised investors because the market had forecast a 3.4-million-barrel jump. Overall, domestic inventories stand at 439 million barrels, which is 2% above the five-year average for this time of the year.
Investors are concerned that this might signal a significant slowdown in the global economy since there is a paucity of energy demand. With output remaining high, particularly in the US, the demand is insufficient to support crude prices.
According to the same report, gasoline stockpiles soared by 4.4 million barrels and distillate inventories rose by 1.5 million barrels.
October West Texas Intermediate (WTI) futures plummeted $2.37, or 4.42%, to $51.26 per barrel at 18:02 GMT on the New York Mercantile Exchange. US crude is already down roughly 11% and the latest developments have halved prices so far on the year. But it is not just oil: The entire energy market is deep in the red.
September natural gas futures tumbled $0.02, or 1.09%, to $2.08 per million British thermal units (btu). September gasoline futures plunged $0.07, or 3.99%, to $1.62 a gallon. September heating oil futures slumped $0.067, or 3.7%, to $1.75 per gallon.
This is bad news for a resource-rich market that depends on energy exports to grow the economy.
On the data front, the Ivey Purchasing Managersâ Index (PMI) rose from 52.4 in June to 54.2 in July. Traders will next look to housing and employment numbers for the loonieâs immediate future.
As the US-China trade conflict escalates, Canadian businesses are expected to feel the brunt. BMO Financial Markets sounded the alarm this week as it warned that private sector investment is anticipated to be flat this year, even after a brief bounce in the first quarter.
The USD/CAD currency pair advanced 0.34% to 1.3324, from an opening of 1.3280. The EUR/CAD surged 0.46% to 1.4942, from an opening of 1.4875.
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