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European Session – Canadian dollar pressured to new 11-year low as oil prices drop

The worst performers on Monday were the Canadian dollar and crude oil, while the US dollar strengthened across the board after Friday’s solid jobs report.

The nonfarm payrolls data bolstered investor confidence in the US economy and raised expectations for a rate hike at the Fed policy meeting next week.

Policy divergence still remains between the Fed and the ECB even though the latter disappointed markets last week and was not as aggressive in delivering stimulus measures. As a result, the euro posted its biggest daily gain since 2009 versus the dollar on Thursday. The euro has since eased back a little, falling below 1.09 to reach a low of 1.0795 today.

ECB President Mario Draghi spoke in New York the day after the ECB delivered a 10 basis-point cut in the deposit rate to -0.3% and extended its asset purchase program for six months to March 2017. He was back to his dovish tone and reiterated that there were “no particular limits” to the ECB’s policy tools. Focus will be on the revised Eurozone third quarter GDP tomorrow.

Economic data out of the Eurozone today included German industrial output and the Eurozone Sentix investor confidence survey, both of which were weaker-than-expected.

In the month to October, German industrial production grew by 0.2%, compared to the previous month’s 1.1% contraction. It was below the 0.8% rise that was forecast. Meanwhile, the December Sentix investor confidence index was below expectations but beat last month’s number to rise to a four month high.

The Canadian dollar was one of the worst performing currencies in the majors today as a result of falling oil prices. Canada produces and exports oil. The nation ranks among the fifth largest crude oil producers. The loonie came under pressure as crude fell below $39 a barrel today, a new 2015 low. The greenback rose to a new eleven-year high against the Canadian dollar to reach a high of 1.3505.

Oil prices have been moving lower since last week’s meeting of the Organization of Petroleum Exporting Countries (OPEC) did not result in any action to lower the oil production ceiling.

The US calendar was light today, with the only focus begin on St. Louis Fed President James Bullard’s speech at 12:30PM ET.

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