Daily Economic Commentary: Canada

[PipDiddy]

Ouch. In just one day, the CAD gave up all of the gains it had over the USD this April. The USDCAD ended the US trading session at 1.0177, almost 200 pips higher! Hah, looks like the CAD won’t be ending this month with a bang.

Apparently, all the negative news from euro zone gave a chance for risk aversion to revisit the markets again. Greece’s debt drama series, which has been a hot topic among currency traders again recently, took another turn for the worse when the International Monetary Fund came out with a statement saying that they need to provide another extra 10 billion EUR for Greece. Needless to say, the CAD took a major hit and experienced a sell-off.

No important data on Canada’s economic calendar again today, but that doesn’t mean that we won’t be seeing some fireworks! Tonight, the FOMC will announce its decision on interest rates, which would have a serious impact on the foreign exchange market. Watch out if the FOMC keeps its commitment to keep rates low for an “extended period” later… Because if the FOMC decides to drop “extended period” from its statement, we might be in for some serious CAD selling… or USD buying for that matter.

[PipDiddy]

A day after rising over 150 pips, the USDCAD gave back half of its gains as commodity trading picked up yesterday. The pair dropped about 80 pips from its opening price to end the day at 1.0090.

Even though trading was one directional, there was nothing really surprising with the USDCAD’s drop, as it was roughly equal to the pair’s average true range of just under 90 pips. It probably got a boost from increased risk appetite, as well as rising oil prices. Remember, with oil being one of Canada’s major exports, we could monitor the prices of crude oil and use it as an indicator to trade the CAD.

Tonight, Bank of Canada Governor Mark Carney will be speaking before the Senate Committee on Banking, Trade and Commerce. Be on the lookout for more hawkish statements, especially since the BOC has become more optimistic over the state of the Canadian economy. He may reiterate comments about rising inflation, which could fuel even more speculation by traders that the BOC will be raising interest rates sooner than expected.

[PipDiddy]

After hitting a high of 1.0198 this week, the USDCAD fell closer and closer to the 1.0000 handle in the past couple of days. Canada didn't release any economic reports yesterday but the Loonie's recent rally suggests that traders could be anticipating some good news from Canada today.

Would Canada's GDP once again result to an upside surprise? Their February GDP reading, which is due 12:30 pm GMT today, could show that the Canadian economy expanded by 0.5% during the month, slightly lower than the 0.6% growth seen last January. But seeing how Canada's monthly GDP reading has been posting better than expected results since November, there could be a chance that the February figure beats the consensus yet again. If it does, the USDCAD might make it all the way below parity to retest its former lows.

Also due from Canada today are its raw materials price index and industrial product price index, both of which are leading indicators of consumer inflation. Prices of raw materials are expected to be up by 0.9% while industrial product prices could post a 0.2% uptick for February. Watch out for those reports at 12:30 pm GMT.

[PipDiddy]

If the greenback was Floyd Mayweather, then the Loonie would be Sugar Shane Mosley since it got beat up miserably last week. By the end of Friday's match, the USDCAD moved farther away from parity and closed at 1.0157.

Canada's GDP figure for February failed to hit the consensus of a 0.5% expansion and posted a mere 0.3% uptick instead. Although this marks the sixth consecutive month that the Canadian economy has posted positive GDP growth, traders seemed disappointed as they sold off the Loonie after the report. On top of that, BOC Governor Mark Carney's cautionary comments made it more difficult for the Loonie to stay afloat. According to him, the Greek debt crisis could have a negative impact on Canada if borrowing costs all over the globe climb higher in reaction to Greece's need to secure more funds.

Now let's shake off those negative vibes and focus on what's in store for Canada this week. The first half of the week looks like a light one for the Loonie since Canada won't be releasing any reports until Wednesday. By Thursday, Canada will release its building permits data which could print a 0.4% rebound in March, following February's 0.5% decline. Also due Thursday is the Ivey PMI, which could show that the manufacturing industry expanded again in April.

On Friday, we'll be seeing Canada's employment report by 11:00 am GMT. It could post another increase in hiring for the month of April, reflecting the strength in Canada's labor market. A total of 20.3K jobs are expected to be added during the month and this could keep the unemployment rate steady at 8.2%. Although stronger than expected results could allow the Loonie to zoom back to parity against the greenback, the non-farm payrolls report from the US might also have a say on the USDCAD's price action on Friday.

[PipDiddy]

The Loonie kicked off the week on a strong note yesterday, rallying against the greenback throughout the European and US trading sessions. The USDCAD ended Monday at 1.0105, 70 pips lower from its week open price.

It seems like the prospect of a rate hike from the Bank of Canada, as well as Canada’s better economic standing than the US, will continue to cap any rallies on the USDCAD.

No data coming out from Canada again today, but the Reserve Bank of Australia’s interest rate decision later could indirectly affect the Loonie’s price action. If the RBA hikes rate as expected, we could see the Loonie edge up higher against the greenback once again.

[PipDiddy]

You know it’s risk aversion in play once you see the USDCAD rise by almost 150 pips from its opening price. With the USD rising across the board and oil prices falling, the USDCAD hit a 5 week high to close at 1.0249.

With no major data on the economic menu for today, we could see the CAD continue its losses should risk aversion remain in vogue. I’d keep an eye out for any news from the euro zone. It seems that their debt issues are at the center of this run to safety. If we see more sell offs in the EURUSD, this could once again lead to another dollar rally, which in turn could alter trading in other currency pairs.

[PipDiddy]

Dementors seemed to enjoy hanging out in the markets since they continued to spread fear and suck the risk appetite from investors. This pushed commodity prices even lower, dragging down commodity-based currencies such as the Canadian dollar.

The Canadian dollar hit a 2-month low against is North American rival, the US dollar, as US economic data came in stronger than expectations. Canada didn't release any economic figures yesterday, leaving their currency with nothing to draw strength from.

Today, Canada is set to release its building permits data and Ivey PMI. Building permits could bounce up by 0.6% in March after sliding by 0.5% in the previous month. Meanwhile, the Ivey PMI could dip from 57.8 to 57.7 in April, implying that the expansion in Canada's manufacturing industry slowed down a bit during the month. Watch out for these reports at 12:30 pm GMT and 2:00 pm GMT respectively since stronger than expected figures could provide the Canadian dollar some support.

[PipDiddy]

Risk aversion, this time stemming from user-error, pushed the Loonie almost 400 pips lower yesterday. From its Asian session opening price of 1.0297, the USDCAD reached as high as 1.0741 before settling at 1.0521 at the end of the US trading session.

Most of the day was characterized by risk aversion from euro zone contagion fears, which was later exacerbated by the news that a large trading desk erroneously sold $16 billion worth of future contracts. The building permits report, which came out better-than-expected (12.2% actual vs. 0.6% consensus), took a back seat because of the news.

For today, watch out for Canada’s employment data at 11:00 am GMT. The expectation is that the country’s unemployment rate remained at 8.2% in April, and that an additional 20,000 jobs were created on top of the 17,900 seen the previous month. This is good news for Canada, which could provide the Loonie with some much needed buying support later.

[PipDiddy]

Ka-chow! Thanks to some good employment data, the CAD came storming back! After hitting a high of 1.0741 last week, the USDCAD was able to close out the week at 1.0440.

Can you hear all that noise? It looks like the Great White North had a party last weekend. How come? Well, 108,700 jobs were just added to the economy last month! Yeahhhh mannnn! This beat forecast of a rise of just 24,300, and marked the largest gain in employment EVER! Meanwhile, the unemployment rate fell to 8.1%, down from 8.2% the previous month.

Rising inflation? Check! Good economic data? Spot on! Now, improving labor market? Hmmm... we may just see the Bank of Canada raise interest rates next month if this keeps up!

The only red flag I see today is the housing starts report due at 12:15 pm GMT. The annualized pace of housing starts is expected to remain steady at 200,000. If however, we see a better than anticipated figure, it may just send the USDCAD back to parity!

[PipDiddy]

The Loonie chalked up some gains against the US dollar yesterday, bringing the USDCAD below the 1.0300 handle. Investors seem to have gotten their risk-taking groove back, pushing the com-dolls slightly higher. Would the Loonie sink or swim today?

Only the housing starts report was released from Canada yesterday. The report showed that housing starts edged up by 1.3% in April to an annualized 202K increase in new home construction. This adds to signs that the Canadian housing sector is now getting back on its feet. Still, the actual results for April came in slightly less than the estimated 203K rise in housing starts.

Moving on to today's economic schedule... Canada has no economic reports in store for today, which means that the Loonie could be extra sensitive to changes in risk sentiment.