The Canadian Dollar fell further against a basket of other currencies, after a dismal finish to the end of the week with the Toronto Stock Exchange and Dow Jones Industrial Average trade leading to further US Dollar strength. Continued losses in crude oil prices likewise boded poorly for the Canadian currency; the downtrodden Loonie falling especially hard against the resurgent Greenback due to plummeting raw materials prices.

The effect of lower oil receipts could already be seen through the past week’s Canadian Trade Balance report, and a further deterioration in its trade surplus would weigh heavily on the highly export-dependent country. Subsequent forecasts for the future of the Canadian Dollar will largely depend on outlook for commodity prices and global equity indices. Given that oil and other key commodity costs have been trading from broader financial market risk sentiment, it is perhaps unsurprising to note that the Loonie has remained especially sensitive to equity market declines. As such, stock market reactions to key US economic event risk will be closely watched during this week. Wednesday will bring a combination of US housing, inflation, and Federal Reserve Open Market meeting minutes, likely to force noteworthy reactions out of US and Canadian equity indices. Also out from Canada this week will be the whole sales report on Thursday and the CPI index out on Friday.

Over this coming week we expect the GBP/CAD cross to remain quite volatile, mainly dominated by Sterling weakness, meaning that the range is likely to remain between 1.80 and 1.90.