Canadian Dollar Weakens on Lower Crude Prices, Higher US Bond Yields

The  Canadian dollar is trading lower against its US and  European counterparts midweek. The  loonie has been tumbling on  lower crude oil prices and  rising US bond yields that analysts fear could impact global growth. It appears that striking a  new trilateral trade deal with the  US and  Mexico only provided short-term relief for  the  currency.

On  Wednesday, the  US Energy Information Administration (EIA) boosted its 2018 and  2019 forecasts for  West Texas Intermediate (WTI) and  Brent crude oil prices. The  former is expected to  average $68.48 a  barrel this year and  $69.56 next year; the  latter is predicted to  be $74.43 in  2018 and  $75.06 in  2019. The  EIA raised domestic output levels by  0.8% to  10.74 million barrels per day (bpd) this year and  11.76 million bpd in  2019.
Higher forecasts could not give crude futures a  boost as  November WTI futures plummeted $1.63, or  2.17%, to  $73.34 a  barrel on  the  New York Mercantile Exchange; and  December Brent futures shed $1.58, or  1.86%, to  $83.42 a  barrel on  London’s ICE Futures exchange.
The  decline in  energy prices occurred even with Hurricane Michael shutting down a  considerable portion of  US output and  Washington sanctions on  Iranian exports.
This week, the  International Monetary Fund (IMF) provided a  two-year economic outlook and  slashed world gross domestic product (GDP) for  the  first time since 2016. A  slowdown in  global economic expansion could affect the  Canadian economy since much of  its growth relies on  exports, mostly commodities.
Late last month, Ottawa was able to  strike a  last-minute trade pact with its North American partners called the  USMCA. It boosted the  loonie to  a  four-month high, but it has since lost 1.4%.
In  economic data, Statistics Canada reported that the  value of  Canadian building permits jumped by  0.4% in  August, up from a  1.5% dip in  July.
Investors will now look ahead to  the  Bank of  Canada (BOC)’s next policy meeting on  October 24. While it is not a  certainty, the  market is anticipating that the  central bank will raise interest rates, the  fourth in  2018.
The US 10-year Treasury note rose 0.017% to 3.223%.
The  USD/CAD currency pair rose 0.39% to  1.2998, from an  opening of  1.295, at  16:45 GMT on  Wednesday. The  EUR/CAD climbed 0.83% to  1.5001, from an  opening of  1.4876.

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