Daily Economic Commentary: Canada

[PipDiddy]

The Loonie put up a good fight against the greenback yesterday, pushing the USDCAD to a low of 1.0581. No economic reports were released from Canada in the past 24 hours but let's check out what's in store for today!

Canada's economic schedule is free from high-impact reports again, with only the quarterly corporate profits report on tap. Corporate profits were up by 7.9% in the past couple of quarters and another rise could be seen for the first quarter of this year. Of course, higher profits could lead to increased hiring and investment for Canadian firms, which would be good for their economy.

[PipDiddy]

Amongst all the major currencies, the Loonie turned out to be the best performer in yesterday’s trading session. The combination of risk appetite, the speculation of a BOC rate hike, and the rise in crude oil prices pushed the Loonie higher across the board.

No important economic data came out yesterday, but we will be seeing Canada’s current account balance at 12:30 pm GMT later. The expectation is its current account deficit for the first quarter of this year fell slightly to 8 billion CAD from 9.8 billion the quarter before. If the actual figure comes in lower, we will probably see some more buying support for the Loonie.

[PipDiddy]

Despite increased risk aversion last Friday, the Loonie managed to stay afloat versus the dollar. Once again, the possibility of the BOC hiking rates weighed heavily on the minds of traders, which enabled to the Loonie to minimize its losses against the Greenback. The USDCAD ended the day at 1.0519, just 18 pips higher from its opening price during the Asian session.

Better-than-expected results on Canada’s current account balance also provided some support for the Loonie. According to the report, Canada’s current account deficit shrunk to 7.8 billion CAD during the first quarter of this year from 10.2 billion CAD the quarter before.

Canada's economic calendar offers a lot of red flags this week.

First up, at 12:30 pm GMT today, Canada will release its GDP report. The expectation is that the country grew by 0.5% in March after expanding 0.3% the month before.

Then, on Tuesday, the BOC will release its highly anticipated interest rate decision. With the country’s inflation rate dangerously close to the BOC’s 2% target, economists are expecting the bank to hike rates for the first time in more than a year to 0.50% from 0.25%. Now, if the BOC does NOT increase rates… oh boy, we’ll probably see the USDCAD test May’s highs.

Lastly, this coming Friday, data on Canada’s labor market will be released. The consensus is that 20,700 net jobs were added in May. Meanwhile, the country’s unemployment rate is predicted to have edged lower to 8.0% from 8.1%. Will the positive expectations on the reports give traders another reason to buy up the Loonie? We’ll just have to see on Friday!

[PipDiddy]

With the US markets closed for the holiday, the Loonie turned out to be the big winner in yesterday’s trading sessions. The USDCAD dropped over 100 pips to end the day at 1.0435.

The catalyst that sent the CAD surging ahead was surprisingly wicked GDP data. The economy grew 0.6% in March, slightly higher than the forecasted growth of 0.5%. Furthermore, this brought the annualized first quarter GDP growth to 6.1% - the best figure in over a decade! The data revealed that consumer spending rose 1.1% during the quarter, while the labor market continues to show more strength.

Why did those CAD bulls jump all over this data? Well, tonight, the Bank of Canada will be releasing its interest rate decision tonight! As my buddy Forex Gump said in his blog yesterday, with more and more signs that the Canadian economy is well on its way to recovery, it might just be time for the BOC to raise rates! Expectations are that they may hike rates by 25 basis points, bringing the rate up to 0.50%.

The question I ask is this – has a rate hike already been priced in? After all, just a few weeks ago, we saw the USDCAD dipping its feet at the magical 1.0000 parity mark! In any case, make sure you keep those forex seat belts fastened and risk management rules in break – we could be in for a wild ride tonight!

[PipDiddy]

Oh, Loonie, why did you fall yesterday?! As expected, the Bank of Canada rose its base rate yesterday, but instead of getting a boost, the CAD got stomped on by the USD, erasing all its gains from the previous day.

As Forex Gump recently pointed out in his blog, it wasn’t like traders weren’t expecting a rate hike. I mean, all the evidence was there! All BOC Governor Mark Carney needed to do was raise rates, which is what he and his fellow policy makers did. The only problem was, however, that they gave no clear indication as to when the next interest rate hike would come!

In a statement accompanying the interest rate decision, BOC officials said that with all the uncertainty and instability in the global financial system, they would have to be very careful in implementing tightening measures. So even though the BOC is the first central bank from a G7 nation to hike rates, we may not see another rate hike over the next couple of months. This disappointed traders, who ended up selling the Loonie.

No data coming out over the next couple of days, so we may not see as big swings in CAD trading. Still, watch out for news around the world which could flip risk sentiment on a dime!

[PipDiddy]

With the wind on its back, the Loonie was able to post spectacular gains versus the yen and the dollar yesterday. Did the rally from the Bank of Canada (BOC) rate hike come one day late?

Canada’s underlying fundamentals are still relatively strong, and it looks like traders believe that this will prompt the BOC to do another rate hike sooner or later. Remember that the BOC was the first G7 central bank to raise rates.

No data scheduled to come out of Canada again today, but please do watch out for the ADP employment change from the US. Better-than-expected results may prop up risk appetite, which, in turn, may lead to another rally in the Loonie’s value.

[PipDiddy]

After speeding towards the 1.0350 mark, the USDCAD pair hit the brakes yesterday and drove back to a high of 1.0464. Canada didn't release any economic figures lately but traders are probably waiting for the results of the employment report before deciding where to take the USDCAD.

Canada's employment change report, which is due 11:00 am GMT today, could print a 16,800 increase in hiring for May. Although this could keep the unemployment rate steady at 8.1%, the estimated uptick in hiring is much less than the 108,700 rise in employment in April. Still, it could mark the fifth straight monthly increase in jobs, possibly allowing the USDCAD to move south.

Also due from Canada is its building permits report, which could show a 1.8% decline in April. Building permits were up by a whopping 12.2% in the previous month.

However, these releases could be overshadowed by the US non-farm payrolls report, which is due 12:30 pm GMT today. This report could bring in extra volatility for the day so stay on the sidelines if you aren't ready to handle the fireworks!

[PipDiddy]

So much for celebrating local news! Despite the release of some encouraging data, the Loonie took a hit as traders decided, “I think I'll play it safe and buy the dollar and yen.” The USDCAD rose almost 200 pips from its opening price to close above the 1.0600 handle.

The good news that I'm talking about was Canadian employment data that was released on Friday. A net number of 24,700 jobs were added to the Canadian economy last May. This was greater than initial forecasts of a rise of 15,000. Apparently, the unexpected surprise was led by hiring in the healthy industry.

Meanwhile, building permits rose by 5.4% last April, while the Ivey purchasing manager's index printed a reading of 62.7. Both these reprots beat consensus. Time to celebrate right? Right?

NOPE! As usual, US employment reports overshadowed the Canadian versions. The poor results of the NFP report sparked another run of risk aversion, which led to widespread dollar buying.

Nevertheless, the good news should be counted as more reason for the Bank of Canada to keep hiking interest rates in coming months. Be aware that BOC Governor Mark Carney will be speaking tonight at 5:50 pm GMT. Who knows – maybe he'll gives us more insight as to what the bank has planned over the rest of the year!

[PipDiddy]

Due to the absence of economic data, the Loonie was unable to find a clear direction yesterday. The USDCAD went as high as 1.0680, dropped to 1.0515, before eventually closing out the US trading session at 1.0603.

For today, await the release of Canada’s report on housing starts at 12:15 pm GMT. The expectation is that an annualized number of 203,000 houses began construction in May, which is an improvement from the 201,000 figure seen in April. The positive forecast on the report could help the Loonie stay afloat against the dollar. Still, be aware of oil prices. A close below the $70.00 handle could lead to a USDCAD rally.

[PipDiddy]

The Loonie edged higher against the Greenback in yesterday's trading, thanks to the pick up in commodity prices and the slight improvement in risk appetite. Even though Canada's housing starts failed to meet the consensus, Loonie strength pushed the USDCAD to a low of 1.0486.

Canadian housing starts for May only amounted to 189,000 instead of the expected 203,000. This was also lower than the 201,000 housing starts reported for April, suggesting that demand for new homes is starting to wane. With the benchmark rate higher this time, could it mean that the housing market would suffer more weakness brought about by higher borrowing costs? We'll just have to wait and see!

Meanwhile, Canada won't be releasing any economic reports today, leaving the Loonie at the mercy of commodity prices and risk sentiment. Keep an eye out for the RBNZ rate decision later today since an upbeat statement could have a positive impact on the Kiwi's fellow com-dolls.