Daily Economic Commentary: Canada

[PipDiddy]

Unlike the major European currencies, the Loonie was actually able to post some significant gains and kick off the week on a firm note yesterday. The USDCAD found itself at 1.0414 by the end of the US trading session, almost 150 pips lower from its Asian session opening price.

The Loonie drew much of its strength from the positive reading on Canada's GDP report. The report showed that the country's economy grew 0.6% in January, higher than the 0.4% expansion seen in December. The optimistic results of the GDP report gave currency traders reason to believe that the Bank of Canada could tighten monetary policy sooner, which provided support for the Loonie.

Like I mentioned yesterday, watch out for the BOC's interest rate decision at 2:00 pm GMT later on. Although the bank is widely expected to keep rates unchanged at 0.25%, I'd keep an ear our for the accompanying statement. Any hint that the bank could raise rates earlier than expected could send the Loonie back to February highs. We all know how currency traders react to rate hike speculations!

[PipDiddy]

The CAD made another convincing run against the dollar yesterday, as the USDCAD closed lower for the third straight trading day. The pair closed at 1.0365. Is it aiming for 2010 lows at 1.0225?

While the Bank of Canada kept rates at 0.25% yesterday, sentiment towards the Loonie was still high as it appears that the central bank has backed off on their stance to keep interest rates low until mid 2010. The BOC pointed out that growth and inflation have beaten their forecasts, which could signal a sooner than expected rate hike. Coupling this with improving labor conditions and a rising housing market, these might be reason enough for the BOC to hit the markets with a rate hike sometime in the next couple months.

No economic reports coming out from Canada today. Be informed however, that the US session is jam packed with data from the US, so watch out for that.

[PipDiddy]

The Loonie made headway against the greenback in yesterday's trading as the USDCAD dipped to a low of 1.0275. Even though Canada didn't release any economic reports, the Loonie was able to take advantage of the surge in risk tolerance.

Thanks to US economic reports which came in slightly better than forecasts, two of the commodity-based currencies, namely the Aussie and the Loonie, strenghtened yesterday.

Canada will release a couple of top-tier economic reports today, which are the building permits and Ivey PMI. Data on building permits, which is due 1:30 pm GMT, could print a 1.0% increase for the month of January. This would be a smaller uptick compared to the 2.4% growth seen in December.

Later on, the Ivey PMI will be reported at 3:00 pm GMT. It could show that the index leaped from 50.8 to 56.0 in February, reflecting a surge in business sentiment. Better than expected figures could push the USDCAD even lower unless other economic reports from the US create a drastic change in risk sentiment.

[PipDiddy]

The Loonie managed to edge the dollar for the fifth straight time yesterday. The USDCAD fell and closed at 1.0306 from 1.0319.

Canada released a couple of tier 1 economic reports yesterday. First was Canada’s building permits which unexpectedly slid by 4.9% in January. Its December figure was also revised down to -2.7% from an uptick of 2.4%. Next was the Ivey PMI which also came in well below the 56.0 estimate with only a 51.9 score.

The Loonie lost a bit of support following as soon as the weak figures above got out but it eventually settled flat to close the day.

No economic reports are due today in Canada. Volatility, however, is still expected to pick up with the upcoming release of the US NFP report later at 1:30 pm GMT.

[PipDiddy]

Unlike its fellow commodity-based dollars, the Loonie was unable to post significant gains on the dollar last Friday. It closed the day at 1.0306, exactly the same as its opening price during the Asian session that day.

Some analysts say that the Loonie rally early last week capped any possible gains it could have gain on Friday. Despite the Loonie's inability to appreciate alongside its comdoll friends last Friday, the overall trend shows that the bias is still buying... errrr, Loonies.

The report on Canada's housing starts at 1:15 pm GMT today will kick off the week. The report measures new residential buildings that started construction for a given period. Housing starts for February is estimated to be at 188,000 (annualized), slightly higher than the 186,000 seen in January.

On Thursday, at 1:30 pm GMT, Canada's trade balance will be released. The trade balance measures the net difference in value between exported and imported goods. The forecast is a positive balance of 400 million CAD. A positive balance is called a surplus, which means the value of goods exported were higher than the value of goods imported. A surplus is usually seen as bullish for the domestic currency because foreigners first need to buy the local currency to import from the country

On Friday, at 1:00 pm GMT Canada's version of the US non-farm payrolls report is due. The report is expected to show that 17,500 net jobs were added in February, much lower than January's 43,000 figure. Meanwhile, Canada's unemployment rate covering the same period is predicted to have remained at 8.3%.

[PipDiddy]

After gapping lower to start the week, USDCAD trading was pretty quiet yesterday. The pair finished just 8 pips lower, to end the day at 1.0277. Could the CAD's bullish momentum be slowing down?

The CAD was unable to make any nice gains despite better than expected results from housing starts data that was released yesterday. The report came out to show that the annualized rate of housing starts was at 197,000, slightly higher than the projected 188,000 figure. This was the third straight month that rate beat consensus.

Nothing major coming out over the next few days, so we could see more range trading take place.

[PipDiddy]

Despite the lack of economic reports from Canada and the US, the loonie was able to edge higher against the greenback during yesterday's trading. In fact, the USDCAD slid by 85 pips from a high of 1.0321 to a low of 1.0236 during the US session.

Canada won't be releasing any top-tier economic reports again today, which means that commodity prices could dictate the price action of the loonie. Of course, watch out for economic reports that could trigger a shift in risk sentiment. Keep an eye out for the rate decision from the RBNZ since a rate hike could pull up the commodity-based currencies.

[PipDiddy]

The Loonie’s price action was like a roller coaster ride yesterday. It opened up weak but was bought up during the start of the European session. Buyers continued to scramble for it when the news that Greece’s debt problem is ‘over’ came out. Investors then quickly took their profits which of course pushed the currency back near to where it initially opened.

No economic reports were due in Canada yesterday. As I’ve mentioned earlier, the Loonie’s movement was particularly affected by the news that came out of Greece.

Today (1:30 pm GMT), Canada’s trade balance and NHPI will be on deck. The country’s trade balance is expected to improve to C$0.3 billion in January from –C$0.2billion while its house price index for the same period is also seen to have gained by 0.5% on top of the 0.4% rise it had during the month prior. Positive results from these accounts could further boost the Loonie’s short term valuation.

[PipDiddy]

The Loonie's price action yesterday turned out to be a woozy! After bouncing around in a tight 20-pip range during the Asian trading session, the USDCAD simply blew up once the US trading session rolled along. The USDCAD went as high as 1.0320 before giving up all of its gains to close the day at 1.0239.

Canada's trade balance which was released yesterday came out with an upside surprise. Thanks to an unexpected uptick in exports, the trade balance reported a surplus of 800 million CAD in January, more than double the 300 million CAD surplus initially expected. Remember, a surplus balance means that value of goods exported is greater than the total value of goods imported. A rising surplus is usually seen as bullish for the domestic currency because foreigners must first buy the local currency, in this case the Canadian dollar, in order to purchase the country's exports.

Canada's new housing price index didn't share the same optimistic tune though. The index revealed that the selling price of new homes only increased 0.4% in January, instead of 0.5%.

On the docket today, at 12:00 pm GMT, is Canada's numbers on its labor market. The country's employment change report, which measures the change in the number of people employed per month, is expected to show that a net number of 17,500 jobs were created in February. Meanwhile, Canada's unemployment rate covering the same period is expected to remain unchanged at 8.3%.

[PipDiddy]

Sniff, sniff.... Is that, parity the CAD bulls are smelling?! The USDCAD just broke though key support at 1.0200 last Friday! Is it just a matter of time till we see the magical 1.000 level?!

CAD buying surged once employment figures released showed better than expected results. The data showed that 20,900 jobs were added to the economy last month, slightly more than the anticipated 17,500 figure. Furthermore, the unemployment rate dropped from 8.3% to 8.2%!

This just adds to the speculation that the Bank of Canada will be raising interest rates sooner than expected, despite comments by BOC officials that they will keep rates at current levels until June at the earliest. Let’s see how this plays out over the next couple of months.

This week, we’ve got manufacturing and whole sale sales on deck. Sales on the manufacturing level are expected to have risen by 0.7% last January, down from 1.6% in December. Meanwhile, wholesale sales growth is predicted to have remained steady at 0.6% growth in the same month Still, given the recent run of goods news from Canada, we may just be in for an upside surprise...

The key data to look out for is on Friday, when the CPI figures and retail sales data are on deck. Core CPI (the account that measures the change in consumer prices excluding the eight most volatile items) is expected to show that prices rose by 0.3% in February, up from the 0.1% pace in January. At the same time, core retail sales (which is retail sales less automobile-related sales), is seen to have risen by 0.5% in January.

If these figures do come in higher than anticipated, it could just spark the CAD to continue its run to parity. Take note, the BOC considers the rate of inflation when deciding upon the interest rate. If there are signs that inflation is rising more quickly than expected, it may just give incentive for the BOC to hike interest rates in order to avoid a surge in inflation.