Daily Economic Commentary: Canada

[ForexGump]

Even if crude oil prices stalled last Friday, the Loonie gained against the Greenback as Canadian wholesale sales posted an unexpected 2.8% rise in July. Canada has a bunch of high-impact economic reports lined up for the first few days of the week and it looks like the Loonie is off to an exciting start!

For today, we have data on foreign securities purchases on tap. Purchases of Canadian securities are expected to slide down from 10.51 billion CAD to 7.76 billion CAD in July. However, if the actual figure shows an upside surprise, then demand for the CAD could surge and cause it to rally. The actual figure is due 12:30 pm GMT.

Retail sales data are in store for Tuesday. Recall that we just saw a notable improvement in wholesale sales last week and, being a leading indicator for retail sales, it hints at an upside surprise in retail sales as well. If you weren't tuned in last Friday, well, let me get you up to speed... Wholesale sales jumped three times more than expected as it rose by 2.8%, which is a huge leap from the previous 0.8% increase. The consensus for retail sales is a 0.5% uptick while core retail sales are projected to be up by 0.1%. With a dramatic improvement in retail sales in the cards, the Loonie is poised to stage a strong rally... possibly after the release of the retail sales report at 12:30 am GMT.

The action cools down on Wednesday, with only a speech by BOC Deputy Governor David Longworth on tap. His comments could contain hints on the next steps that the central bank could take in terms of its monetary policy. He could also highlight the recent improvements in the Canadian economy and thus boost the CAD. His speech at the Chamber of Commerce is scheduled at 11:35 am GMT.

The Loonie takes a break for the last couple of days of the week since both Thursday and Friday are report-free. The USDCAD could move to the usual rhythm of commodity prices and shifts in risk sentiment.

[ForexGump]

The Loonie started the week on a bad footing and slid against the Greenback for the third day in a row. The USDCAD, after marking its yearly low at 1.0596 last week, retreated back to close yesterday at 1.0774.

Foreign securities purchases of Canadian financial assets significantly dropped to C$350 million in July from C$10.51 billion in June. The account was only expected to cool off to C$7.76 billion. Foreign securities purchases measure the total value of domestic stocks, bonds, and money-market assets purchased by foreigners. Any drop in the account also translates to similar slide in the demand for the CAD since foreigners need to use CAD to purchases Canadian assets. Hence, any decline in the figure is usually bearish for the Loonie.

The CAD lost support following the report.

On tap today at 12:30 pm GMT is the release of the Canadian retail sales figures in July. Core retail sales are seen to slow to 0.1% after rising by 1.0% in the month prior. The headline account is also projected to dim to 0.8% from 1.0%. The CAD may continue to slide further or range at best given the projections.

[ForexGump]

The Loonie took back all of its losses versus the Greenback from Monday’s trading session despite the report on retail sales showing dismal results. It seems that spending remains subdued as the country recovers from the world’s worst post-war recession.

Contrary to the 0.8% forecast, retail sales in August fell 0.6% despite record-low borrowing costs. The core figure, which excludes vehicle sales, printed a 0.8% decline too. The significant drop in sales was mainly from lower sales of gas at self-service stations, the report showed. The decline in food and beverage sales also contributed to the fall in sales.

No economic data due for release today but a talk by BoC Deputy Governor David Longworth is scheduled at 11:35 am GMT. Speeches by central bank members are watched by investors as they could provide some clues as to how the bank sees the economy.

[ForexGump]

Lots of up and down movement on the Loonie yesterday, although ranges pretty much held. The USDCAD closed higher at 1.0753, as we saw oil prices fall below $69 per barrel.

BOC Deputy Governor David Longworth said that the Bank of Canada will cut back on the amount of emergency liquidity they will be offering. He said that recent developments in the credit markets justified such a move. Some analysts say that this could be the start of Canada’s exit strategy...

Longworth also said that a strong CAD may curb growth for the Canadian economy. We’ve been hearing a lot of verbal threats by the BOC regarding this matter, as they've said that they could implement currency intervention if the CAD is too strong. Given how weak the USD has been as of late, I really wonder when we’ll actually see any follow through if the CAD’s appreciation persists.

Crude oil trading dipped below $69 per barrel yesterday, as a report indicated that crude oil inventories in the US rose by 2.86 billion barrels. It was initially forecasted that there would be a drop of 1.4 million barrels. This marked the biggest drop in 5 weeks. With no other economic reports coming out this week, could oil prices set the tone for CAD trading for the rest of the week?

[ForexGump]

The USDCAD broke free from consolidation mode and sprinted towards the 1.0900 mark yesterday. While the USD staged a strong rally, the CAD and its comdoll allies were unable to draw strength from gold and oil prices.

The CAD gave back its recent gains to the USD as the Fed announced that it would scale back some of its emergency lending programs. Traders took this as a bullish sign for the US economy and upped their long positions on the USD. Additionally, BOC Governor Mark Carney's dovish comments about their economy could have provided more downward pressure for the CAD. He said that an economic recovery would not be "self-sustainable" while Canadian Finance Minister Jim Flaherty proposed an expansion of their mortgage buyback program to 125 billion CAD. It was clearly not a good day for the Loonie...

Canada has no economic reports on today's agenda, which means that price action of the USDCAD could be largely influenced by changes in risk sentiment spurred by US economic reports. Also today, the G20 will be releasing their final statement. More volatility could be seen especially if we see some surprises in the G20 statement. It's time to lock in more pips for the week, my forex friends! Good luck!

[ForexGump]

The USD/CAD pair’s price action last Friday was muted as no economic data came out of Canada. The pair attempted to rally to 1.1000 but fell a few pips short. Looking ahead, the price of oil will be an important factor in determining the direction of the CAD’s value.

No economic data today but expect to see the country’s monthly GDP report tomorrow on Wednesday at 12:30 pm GMT. The country is expanded once again in July, this time by 0.4%. It first officially came out of the recession last June, when it posted that its economy grew by 0.1% after shrinking for eight consecutive months.

[ForexGump]

It seems the Loonie managed to fight back and retrace some of its losses from week before in yesterday's trading session. The USDCAD pair opened the day at 1.0910 and closed at 1.0870 by the end of the US session.

In other news, Bank of Canada Governor Mark Carney did a bit of jawboning in his talk yesterday as he said that the Loonie’s strength could pose some serious threat to growth. In addition, Carney indicated once again that record-low interest rates in Canada would probably remain unchanged until the middle of 2010.

No economic data up for release today but expect to see Canada’s monthly GDP report tomorrow at 12:30 pm GMT.

[ForexGump]

The CAD gained against the USD for the 2nd day in a row. It seems that USD buyers have lost some steam after gaining some support last week. The pair closed the day at 1.0852.

We could be in for a wild ride during the US session, as GDP m/m report will be released at 12:30 pm GMT. Canadian GDP is projected to have risen by 0.4% in July. If the report comes in line with this projection, we could see a further boost in the CAD.

Also scheduled for release at 12:30 pm GMT are the industrial product and raw material price indexes. Both indexes are expected to show an increases in prices in the past month.

Lastly, could we hear more catcalls from Canadian officials regarding the state of the Loonie? Remember, the BOC has expressed concern that a strong CAD may hurt recovery… Just something to take note of…

Also, be wary that the ADP non-farm employment change and crude oil inventory data will be released in the US today. These could both have a significant impact on the CAD – so watch out!

[ForexGump]

The Canadian economy stalled in July as its monthly GDP was unchanged from the previous month. Even so, the Loonie was able to rally and bring the USDCAD to a low of 1.0672 yesterday.

The flat GDP growth in July resulted from weak activity in the mining sector offsetting the rebound in the automobile sector. Meanwhile, Canada's industrial product and raw materials prices rose by 0.5% and 3.7% in August, boosted by rising gas and metal prices.

No economic reports are due from Canada until the end of the week but economic reports from the US would likely affect the price action of the USDCAD. For today, we have initial jobless claims, ISM manufacturing PMI, and pending home sales on the US schedule. Also, US Fed Chairman Ben Bernanke is scheduled to deliver a speech today and you know how the markets usually go wild when the Big Ben talks!

[ForexGump]

Yesterday was one of those days that long position holders on the Loonie would want to forget. The CAD took a back seat against ALL the other major currencies in yesterday’s price action due to risk aversion, particularly in the US capitals markets.

Canada was idle yesterday in terms of economic reports. The lack of economic updates in the country, however, did not save the Loonie from being sold off. The CAD lost support versus all the other majors given the broad-based sell off in the equities markets. Buyers became wary about today’s employment report in the US and stayed in sidelines in the mean time.

Canada will once again be report-free today. The CAD would most likely be constrained within a range ahead of the NFP report today. Though, we should expect some volatility to occur right before and after of its release.