This was the week: BOC is bullish again, data is good, but oil slips

Bank of Canada Governor Stephen Poloz and Deputy Carolyn Wilkins testified in parliament and expressed optimism about the economy. Wilkins went further and said it is the best time to raise rates. The economy grew by 0.1% in August, better than had been expected. In addition, job growth also surprised to the upside with 11,200 positions gained.

On the other hand, Canada’s central export, oil, fell sharply. Iranian oil will eventually reach global markets as the US is set to waiver the upcoming sanctions from eight countries. In addition, the supply/demand balance tilted against the price of the black gold. The downfall in crude, which is in a bear market, weighed heavily on the loonie.

Data was mostly upbeat. The US gained 250,000 jobs in October, better than expected. In addition, wage growth finally surpassed 3% and hit 3.1%, the best since 2009.

The primary driver for the US Dollar and markets was the relationship between China and the US. In a turnaround, President Trump tweeted about a successful conversation with his Chinese counterpart Xi Jinping. Reports later came out about preparations for a trade deal. Despite denials, the upbeat mood prevailed in markets and weighed on the safe-haven US Dollar.

Canadian events: A few housing figures and a focus on oil

Building permits kick off the week. They rose by 0.4% in August. The Richard Ivey School of Business reported a dramatic downfall in its PMI back in September, but that was just before the new trade deal, the USMCA, was announced. A leap back to higher levels of growth is projected.

Housing starts disappointed in September and may now bounce back up above the 200K annualized level.

More importantly, the US imposes the sanctions on Iran at the wake of the new week. At the moment, the waiver for eight countries implies a smooth transition to the new regime. A lack of any supply shocks is due to weigh on petrol prices, with a consequent adverse impact on the Canadian Dollar. Canadian oil already trades at a substantial discount in comparison to US oil.