Daily Economic Commentary: Canada

[PipDiddy]

Just when the Loonie got its Tim Tebow on, reaching a high of 1.0140 against the dollar, it started to lose its momentum. USD/CAD then spiked up to 1.0200 before ending the day 24 pips above its opening price at 1.0193.

Our forex calendar didn't have anything on tap from Canada which left the Loonie at the mercy of market sentiment. Too bad it seemed like investors weren't in the mood to buy riskier assets.

I wonder if the NHPI report for November will become the currency's piptorade in today's trading and allow it to hustle some muscle on the charts. Due at 1:30 pm GMT, it is expected to show that house prices grew by 0.2% during the month.

A better-than-expected figure will probably be bullish for the Loonie so stay tuned!

[PipDiddy]

The absence of high profile economic reports on Canada's economic calendar kept USD/CAD trading within a relatively tight 70-pip range yesterday. USD/CAD ended the day at 1.0191, just two pips lower from its opening price at 1.0193.

There was only one report that was released. The New House Price Index, or NHPI, showed an increase of 0.3%, slightly higher than the 0.2% rise initially predicted. It was also a better figure than the one seen last month.

Today, only the trade balance is scheduled to be published. The market is expected the report to show a 500 million CAD deficit, which is a significant decrease from the previous month's 900 million CAD deficit. Await the actual figure at 1:30 pm GMT.

[PipDiddy]

Risk aversion strikes back! After a couple of days of staying below the 1.0200 handle, USD/CAD surged to a high of 1.0284 on Friday as higher-yielding currencies lost their ground. With the pair gapping higher over the weekend, could this mean that risk-taking would remain in check for the coming days?

Better than expected data from Canada wasn't enough to keep the Loonie afloat last Friday even though the trade balance showed that the 0.5 billion CAD deficit in October turned into a 1.1 billion CAD surplus in November. It turns out that this piece of good news was overshadowed by the set of debt rating downgrades doled out by the S&P on the euro zone. Make sure you drop by my euro zone economic commentary to find out what happened!

This week, the BOC is set to make its interest rate decision on Tuesday while the Canadian manufacturing sales data is set for release on Thursday. By Friday, Canada will report its headline and core inflation figures for December. As far as top-tier events are concerned, that's pretty much it for Canada so make sure you keep an eye out for those reports if you plan to trade the news!

[PipDiddy]

Thanks to rising commodity prices, the Loonie managed to get on the winning side of the fence yesterday as it marked 63-pip gain over the Greenback. USD/CAD sat at 1.0180 by the end of the U.S. trading session.

In terms of economic reports, the Canadian front had nothing to offer. But today, expect something different as the Bank of Canada will be announcing its decision on interest rates at 2:00 pm GMT.

The market widely expects the central bank to keep the benchmark interest rate at 1.00%, so pay attention instead to the accompanying statement. Hawkish remarks, such as a potential rate hike in the coming months, tend to be bullish for the Loonie.

[PipDiddy]

There were plenty of good vibes among the Loonie bulls yesterday as better-than-expected reports from Canada fueled appetite for the Canadian dollar. USD/CAD fell for the second day in a row, this time sliding by another 32 pips to 1.5566.

The foreign securities report started the party by printing at 14.99 billion CAD in November, which not only exceeded October’s 3.85 billion figure, but also expectations of 6.78 billion demand. Looks like investors like to buy them Loonies, eh?

The Bank of Canada was also a big hit as it kept its interest rates unchanged at 1.00% this month. Not only that, it also raised its 2011 economic growth forecast from 2.1% to 2.4%; its 2012 estimates from 1.9% to 2.0%. The central bank also expects inflation to reach its 2% target by the first quarter of 2013, a quarter earlier than previously predicted.

Will the BOC follow through with more good news today? The central bank will release its monetary policy report at 3:30 pm GMT today, which will be followed by a press conference at 4:15 pm GMT. Don’t even think of missing these reports!

[PipDiddy]

Yesterday was another good day to be siding with the Loonie as it pocketed a few more pips to add to its recent collection. USD/CAD dropped 40 pips to close at 1.0113, recording its third straight daily slide. Will it make it four in a row today?

With markets worldwide enjoying a broad risk rally, the Loonie and its fellow comdolls had another field day on the charts.

As for the BOC's monetary policy report, well... It really didn't tell us anything new about the Canadian economy. It pretty much just reiterated what the central bank announced in its rate statement on Tuesday, but with more details. Basically, though the growth outlook has improved for Canada (Remember the upward revision to growth forecasts?), the BOC remains worried about the European debt crisis' potential impact on Canada. They say that a recession in the euro zone could slash Canadian growth by 0.6%!

Anyway, today we have more Canadian data to work with. At 1:30 pm GMT, manufacturing sales data will be available. Survey says sales probably increased by 1.0% in November, a nice reversal to the 0.8% slide in October. Should results come in better than expected, look for the Loonie to extend its rally!

[PipDiddy]

Even though risk sentiment was up, the Loonie was unable to capitalize. The Loonie gained early during the day, but lost midday to end the U.S. trading session where it started. USD/CAD closed at 1.0114, just a single pip higher from its opening price. It appeared that the Loonie was severely overbought, as it had already gained greatly in the last three days.

The only news report released, the manufacturing sales, came in better than expected. It printed a 2.0% gain, double the market forecast and opposite the 0.6% decline from the previous month.

Today will be a big day for the Loonie as Canada's consumer price index will be published. The market is expected the report to show a 0.1% decline. Meanwhile, the core version of the report is predicted to show a 0.2% decrease. The actual figures will come out at 12:00 pm GMT.

[PipDiddy]

The Loonie found itself sitting on the weaker side of the fence as the trading week closed last Friday. USD/CAD was unable to find a break below 1.0100 and closed the day 28 pips higher from its opening price that day.

The losses of the Loonie could be attributed mainly to the weak inflation figures. The country's consumer price index printed a decline of 0.6%, much higher than the 0.1% decrease initially expected. Meanwhile, the core version of the report showed a 0.5% drop versus the 0.2% predicted.

This week, the only red flag on Canada's calendar is the retail sales report. The report is slated to print a 0.2% increase, which is slightly lower than the previous month's 0.7% gain. Better-than-expected figures typically result in Loonie rally.

[PipDiddy]

Just like its comdoll siblings, the Canadian dollar managed to post some decent gains versus the dollar, as USD/CAD fell 76 pips to close at 1.0074. Now the pair is sitting just below major support at 1.0100, what could be in store for the Loonie?

We could be in for some wild moves during the New York session, as retail sales figures will be on tap at 1:30 pm GMT. Expectations are that headline retail sales growth was at 0.3% last November, while core retail sales increased by 0.2%.

If the report comes in much higher-than-anticipated, USD/CAD may just head off for new lows! Parity anyone?

[PipDiddy]

Not this time, Loonie! Though Canadian core retail sales clocked in above forecasts, the Loonie was unable to capitalize on the better-than-expected data. As a result, USD/CAD inched up 25 pips from its opening price of 1.0074 to end the day just below the 1.0100 handle.

Canadian retail sales delivered a pleasant surprise yesterday as the core figure exceeded expectations. It came in at 0.3% in November, which is just a tick above the 0.2% rise that analysts had predicted. On the other hand, the headline figure fell in line with expectations at 0.3%. The downside is that the previous month's 1.0% rise was revised down to just 0.9%.

No hard stats on tap today, but with the FOMC statement due later in the New York session, we could very well see plenty of action on USD/CAD. Stay sharp, fellas!