What’s happening: The Canadian dollar gained versus the greenback on Monday, nearing its highest level in seven months.
What happened: The US dollar remained under pressure due to the lack of progress in talks between the Congress and the White House around a new covid-19 rescue package.
The loonie extended its six-week rally supported by Canada’s release of upbeat economic data indicating a good pace of recovery in the country’s economy.
Why it matters: The Canadian Real Estate Association reported that the country’s home sales hit a record high in July, surging 26% month-over-month. Sales in July also climbed 30.5% versus the same month last year.
Th loonie closed last week on a positive note for the currency, backed by manufacturing sales jumping 20.7% in June. The recorded growth was higher than markets were expecting, which helped the Canadian dollar delivery a gain of 1%, rising for the sixth straight week.
The Canada’s currency was also bolstered by a rise in the price of oil, which is one of the country’s major exports. US crude oil gained 2.1% to settle at $42.89 per barrel on Monday, with China planning to increase crude imports from the US, countering the so-far escalating tensions between the two countries.
On the other hand, the US dollar continued to weaken, taking the dollar index, which measures the greenback’s performance against a basket of major currencies, lower on Monday, as there were no signs of progress in the negotiations over a fresh stimulus for the economy.
Canada’s government bond yields also declined on Monday, with the 10-year yield dropping 3.1 basis points to 0.582%, down from the two-month high of 0.642% set last Thursday.
The loonie traded between 1.3192 and 1.3262 against the US dollar on Monday, after hitting its highest intraday level since January 30 of 1.3188 last Thursday.
What to watch: With no major data out from Canada until Wednesday, the USD/CAD pair is expected to remain range bound till mid-week. Canada will be releasing reports on inflation rate, wholesale sales, ADP employment and retail sales during the later part of the week.
Investors will also keep an eye on the FOMC (Federal Open Market Committee) minutes, which are scheduled to be released on Wednesday.