Daily Economic Commentary: Canada

[PipDiddy]

Despite the relatively slow trading day, the loonie managed to take advantage of the US traders' absence and make some headway against the greenback. After a brief period of consolidation, the USDCAD slipped below the 1.5000 mark even though Canada didn't release any economic reports.

Canada will release its manufacturing sales data today 1:30 pm GMT. It could print an increase of 2.1% in December, much stronger than the 0.1% uptick seen last November. This indicator has been rising strongly in the past few months and, if the actual figure meets or beats the consensus, the loonie could make further headway.

[PipDiddy]

Crude oil soared by 3.9% in yesterday’s trading to settle at $77.01 per barrel. This move helped launch the US equities markets to its best single day performance this year. The spike in oil prices also benefited the Loonie. The USDCAD fell and closed at 1.0436 from 1.0491.

Canada’s manufacturing sales have grown by 1.6% to C$43 billion in December, trumping its measly 0.1% gain during the previous month. The jump in manufacturing was led by aerospace and motor vehicles sales. Aerospace sales surged by 28% to C$1.3 billion after sliding by 17% in November while motor vehicle sales rose by 4.4% in December to C$3.64 billion. Still, the latest score is below the market’s 2.1% consensus. The USDCAD lost a bit of support following the report.

No major economic data will be released today in Canada. The Loonie, though, could sway later depending on the result of the US’s housing starts and building permits data. Strong figures in those accounts could push the Loonie higher.

[PipDiddy]

After six days of winning, the Loonie finally took a breather and gave up some of its gains in yesterday's trading session. The USDCAD ended the US trading session at 1.0464, 30 pips higher from its opening price during the Asian session.

Yesterday, the wholesales sales report for the month of December was released. It showed that sales climbed 0.7%, which was slightly higher than the 0.6% initially predicted. Still, the rise reported was at a much slower pace than November's 2.7% gain, which kept Loonie bulls at bay.

On the docket today is Canada's consumer price index for January. The consumer price index measures the monthly percentage increase or decrease in the average level of prices of consumer goods and services. The expectation is a rise of 0.3%, opposite the 0.3% drop seen in December. Meanwhile, the core version of the report, which excludes volatile items such as food, energy and automobile sales, is predicted to show a 0.1% uptick. The actual figures will be released at 12:00 pm GMT.

At 1:30 pm GMT, Canada's report on international securities transaction will be released. Just like the US TIC flows, this report shows all the flows of money in and out of the country for stocks and bonds. If the report's balance is positive, it means that more securities were sold than purchased by Canada. The consensus is a positive balance of 7.21 billion CAD in December, lower than the 10.54 billion CAD seen the month prior. Currency traders usually view a positive balance as bullish for the domestic currency because purchasing bonds and stocks of a country requires investors to buy the domestic currency first.

[PipDiddy]

The USDCAD was caught on the wrong side of the fence early today after the US Fed made a surprise discount rate hike. The USDCAD soared following the surprise, and is now trading around 1.0480.

Before the Fed's statement was made, the Loonie was actually leading the way against the dollar, as the USDCAD had just established a new yearly low. The reason why it rallied a bit was because of the the CPI figures that came out smoking hot. While monthly data came in line with expectations to show a 0.3% increase in consumer prices, the annual figure rose sharply from 1.3% in December to 1.9% in January!

Do you know the significance of this?! Well, the Bank of Canada's inflation target is 2.0%, which means that there is that chance that the BOC will be raising interest rates sooner than expected. Still, some officials point out that the increase may be simply because of low fuel prices at the same time last year. If we do see inflation rise sharply in coming months, let's see if this would force the BOC's hand to raise interest rates.

In other news, Canada's report on foreign securities purchased was released last night. The data indicated that the balance stood at 11.23 billion CAD, which beat both expectations for this month, as well as last month's figure of 10.54 billion CAD. This indicates that demand for Canadian securities rose in past months, as traders need the CAD in order to purchase domestic securities.

We may see some more volatile moves tonight when retail sales data is released at 1:30 pm GMT. Retail sales are expected to have risen by 0.6% in month of December, while core sales – which doesnt include vehicle sales – is seen to have increased by 0.4%. This shouldn't come as too much of a surprise – after all, it was the holiday season! Still, watch out if the reports show better than expected results. It may just give the Loonie the boost it needs to recuperate from its losses early this morning.

[PipDiddy]

Unable to break above the 1.0500 mark, the USDCAD tumbled by a little more than a hundred pips to a low of 1.0389 last Friday. Although economic reports from Canada were generally weaker than expected, the CAD was still able to gain the upper hand.

Canada's retail sales report printed a modest 0.4% rise for December, falling short of the consensus of 0.6% growth. The core retail sales showed a 0.4% increase, just as expected. Still, it's important to note that retail sales were able to rebound from the 0.5% decline seen in November. The growth was led by a 3.3% increase in sales of general merchandisers, such as department stores.

Meanwhile, Canada's leading index also fell short of expectations as it climbed by a mere 0.9% instead of rising by 1.1%. This leading index reading for January was also lower than December's 1.5% rise.

Moving on to this week's set of economic data... Well, Canada's calendar looks a bit bare. No economic reports are due today but keep your eyes and ears open for a speech by BOC Senior Deputy Governor Paul Jenkins at 7:30 pm GMT. He is due to participate in a panel discussion at the Government of Canada and Financial Times Global Business Leaders Day Seminar and his words could contain hints on the central bank's future monetary policy decisions.

Canada's first economic release of the week comes on Wednesday in the form of the corporate profits report. After rising by 7.9% in the third quarter of 2009, it could post a slightly moderated increase for the succeeding quarter. Still, this report is slated to have a minimal impact on the price action of the CAD.

On Friday, we'll take a look at Canada's current account balance. It showed a deficit of 13.1 billion CAD in the third quarter, which could narrow down to 8.9 billion CAD in the fourth quarter. A stronger than expected figure could boost the CAD higher so watch out for the actual figure at 1:30 pm GMT.

[PipDiddy]

After opening on a positive note, the loonie eventually slipped against the dollar to end yesterday’s session at a loss. The USDCAD rose to 1.0425 from 1.0389.

Bank of Canada Senior Deputy Governor Paul Jenkins said yesterday in a panel discussion at the Government of Canada and Financial Times Global Business Leaders Day Seminar that the Canadian market is robust. He also said that the economy is safe as of now from a housing bubble and that the Canadian government will form new rules to prevent such from happening.

No economic reports are due today in Canada. Though, the loonie might still experience some volatility given the top tier economic events in the UK, euro zone, and the US. Risk aversion from a likely weak German Ifo business climate and some inflation concerns on the UK could hurt the anti-dollars like the CAD.

[PipDiddy]

No thanks to risk aversion, in just a single day, the Loonie gave up all of its gains from last week. The USDCAD closed the US session 1.0567, 150 pips higher from its opening price during the Asian trading session.

The likely culprits for the unexpected spark in risk aversion yesterday were the worse-than-expected results of the CB consumer confidence report from the US and the news that Greece's top four banks have had their credit ratings downgraded.

Just like yesterday, Canada's economic cupboard today lacks any important data. This doesn't mean that the Loonie's price action will be contained though! The US has some major events scheduled at 2:00 pm today, namely the release of the new home sales report and a speech Federal Reserve Chairman Ben Bernanke, which would provide some direction for the Loonie.

[Huck]

The Loonie recovered some of its losses yesterday, as trading wasn't as wild as the day before. The USDCAD pair traded within its range and closed lower at 1.0511.

With everyone watching the Olympics right now, no major data has been released from Canada recently. Watch out though, for data coming out from the US today. The durable goods orders are due, while US Fed head Ben Bernanke will be speaking again. While yesterday's reaction to Bernanke's speech was muted, one shouldn't take his words for granted as he may just drop a surprise or two in the markets. Be careful!

[PipDiddy]

The lack of economic reports from Canada left the loonie utterly helpless against yesterday's greenback strength. Bleak US economic reports fueled a run of risk aversion, pushing the USDCAD near the 1.0700 mark.

Today, Canada has its current account balance on tap. It could show that their current account deficit narrowed from 13.1 billion CAD to 8.7 billion CAD in the fourth quarter, reflecting an increase in exports and foreign purchases for Canadian securities. A better than expected balance could allow the loonie to bounce back from its recent fall so better keep an eye out for the actual figure due 1:30 pm GMT.

Also keep an eye out for the release of major economic reports from the US, namely their preliminary GDP reading and existing home sales report. Weaker than expected figures might ensure that risk aversion is here to stay.

[PipDiddy]

The loonie got a boost last Friday to end positively against the greenback. The USDCAD fell and settled at 1.0525 from 1.0593.

The CAD still managed to register some gains last Friday despite the worse-than-expected Canadian current account balance. Canada’s current deficit came in at –C$9.8 billion during the fourth quarter versus the –C$8.7 billion forecast. Its previous reading was also revised down to –C$13.8 billion from –C$13.1 billion.

Today (1:30 pm GMT), Canada’s annualized 4Q GDP will be released. Canada’s economy is seen to have expanded by 0.4% in December which would translate to an annualized 4.0% growth during the last quarter of 2009. Such growth could definitely give the CAD some additional support.

Tomorrow, it will be the BOC’s turn to decide on its interest rate. While the bank is still expected to maintain its rate at 0.25%, a strong GDP reading could spark some speculation that the bank would raise its rates sooner than later.

Come Thursday, both Canada’s building permits and Ivey PMI will be reported. Building permits are projected to print a 1.1% growth after already gaining by 2.4% during the month prior. The Ivey PMI, on the other hand, is projected to be at 56.0 from 50.8.

From the looks of it, things are looking up for Canada and the loonie at least for the first week of March.