Daily Economic Commentary: Canada

[PipDiddy]

Guess who was left out in yesterday's big risk rally? That's right, the Loonie! With Loonie traders sitting on the sidelines in anticipation of today's big rate decision, USD/CAD saw little action and closed 11 pips above its opening price at 1.0147.

It seems the markets didn't want to place bets on the Loonie ahead of the Bank of Canada rate statement. Remember, in its last rate statement, the BOC kept rates unchanged but also hinted at the possibility of withdrawing stimulus from the economy.

Since then, Canada has posted some pretty upbeat employment figures. But is this enough to push the central bank to tighten its policy? Who knows! Some believe that the BOC may take a more neutral stance in its rate statement to address the crummy global economic outlook. But if the BOC unleashes a few hawkish words later, it could result in a strong Loonie rally, so be sure to tune in at 1:00 am GMT!

[PipDiddy]

The Loonie joined its comdoll buddies on the risk appetite train yesterday when a dollar-bearish news propelled commodity-related currencies higher in the charts. USD/CAD tipped a high at 1.0170 before it closed 21 pips below its open price.

Okay, maybe the Bank of Canada also played a role in the Loonie’s rally. Yesterday the central bank decided to keep its rates at 1.00%, downgrade its 2012 and 2013 growth forecasts by a bit, and upgrade its 2014 predictions.

What caught the investors’ attention though, is that the BOC was still more hawkish than expected. See, analysts had believed that with other major central banks like the ECB, BOE, and PBoC considering more stimulus, the BOC would also reign in its hawkish feathers.

But the BOC just can’t be tamed! It retained its previous stance on stimulus, saying that it can still be contained. And for some market geeks, that means interest rate hikes!

Maybe we’ll know more about what the BOC’s stance on stimulus today when the BOC monetary policy report and BOC press conference are scheduled at 2:30 pm GMT and 3:15 pm GMT respectively. No other economic data will be released, so make sure you’re at the edge of your seats when the BOC takes center stage!

[PipDiddy]

That's two in a row for the Loonie! The Canadian currency chalked up another day of wins against the Greenback as an upbeat economic outlook from the BOC provided the comdoll additional support. Will the Loonie extend its winning streak to three?

The BOC monetary policy report showed that Canadian central bank officials believed that it's appropriate to withdraw some of their monetary stimulus soon. Considering how other central banks are very concerned about their own economies and are even implementing additional easing measures, this optimistic assessment from the BOC is definitely a reason for the Loonie to party!

Canada won't be releasing any economic reports today, which means that the Loonie might carry on with yesterday's rallies. Be mindful though, that the U.S. is set to release a few top-tier data today and that these could have an impact on risk sentiment. Drop by my U.S. commentary to see what you should watch out for!

[PipDiddy]

Make that three in a row! Thanks to a nice risk rally, the Canadian dollar edged higher, as USD/CAD closed at 1.0078, 29 pips lower for the day. Will the comdoll continue to dominate or will the Greenback make a comeback to end the week?

Just like its comdoll siblings, the Canadian dollar benefitted from a nice run by commodities yesterday. A rise in wholesale sales also helped, as they came in better than expected, growing at 0.9% last month instead of the 0.2% forecast.

For today, we’ve got inflation data on tap in the form of the consumer price index due at 12:30 pm GMT. The headline CPI report is projected to show a decline in prices of 0.2%, while core CPI is estimated to print a 0.1% drop. If these reports do indicate that inflation remains subdued, it could give the Bank of Canada more leeway with regards to interest rate policy.

[PipDiddy]

Double whammy for the Loonie! Weak Canadian economic data combined with a drop in oil prices left the Canadian dollar unable to sustain its gains against the Greenback last Friday. What happened and can we expect another Loonie selloff this week?

Canada printed a 0.4% decline in its core CPI for June, weaker than the estimated 0.1% drop, while its headline CPI figure also came in at -0.4%. This marks the headline figure's second consecutive monthly drop, suggesting that inflationary pressures are weak in Canada and that it might not be the best time for a BOC rate hike just yet.

There are no reports on Canada's schedule for today so, if you're planning to trade the Loonie, I suggest you read up on possible outcomes for Canada's retail sales reports due tomorrow 12:30 pm GMT. Both the headline and core figure are expected to post rebounds, which could revive talks of BOC tightening and trigger Loonie buying again.

No other reports are due from Canada for the rest of the week so make sure you also keep close tabs on risk sentiment to figure out where this higher-yielding comdoll could be headed. Good luck!

[PipDiddy]

And the bleeding continues! The Loonie continued to weaken against the Greenback as traders pushed USD/CAD higher up the charts. The pair gapped up 16 pips to start the week, but then continued trading higher until it ended the day 26 above its opening price at 1.0168. When will it stop?

No news from Canada yesterday, so the markets had little reason to stop dumping it. However, if today's retail sales report (due at 12:30 pm GMT) prints an upside surprise, it may turn the tides in favor of the Loonie once again.

The headline sales figure is expected to print a 0.4% surge in sales for May to undo the 0.5% slide in April. Meanwhile, the core figure is anticipated to come in at 0.1%, up from 0.3% in April.

Keep your eyes on this one, fellas! If it prints highly upbeat results, it could serve as a strong reason for the BOC to withdraw stimulus from the economy!

[PipDiddy]

Traders didn't go loco for the Loonie yesterday in the face of weaker than expected retail sales and risk aversion. USD/CAD traded higher after opening at 1.0169 to finish the day at 1.0203.

Data released yesterday revealed that consumer spending only grew by 0.3% in May and fell short of the market's forecast by 0.1%. However, excluding volatile items, the core retail sales figure printed at 0.5%, higher than the 0.1% consensus.

Some analysts say that the disappointing headline figure might have weighed down the Loonie because the BOC had been banking on stronger consumer spending when it made its last rate decision. A lot of them wonder if the disappointing figure for May would become a game-changer for the central bank.

Our forex calendar is blank for reports from Canada today. However, make sure you're on your toes for reports from the euro zone as market sentiment also played a role in the Loonie's price action in yesterday's trading. Be careful, ayt?

[PipDiddy]

Thanks to a bit of good news from the euro zone, the Loonie got a rare taste of victory against the Greenback. It gained 50 solid pips against its American counterpart as USD/CAD slipped to 1.0153.

With no major reports on tap, yesterday's Loonie rally had nothing to do with Canada and everything to do with risk appetite! Reports from the euro zone that the ECB may consider granting the ESM a banking license stoked the markets' appetite for high-yielding assets, giving the Loonie and its fellow comdolls a boost on the charts.

Whether or not the Loonie will be able to hold on to its gains will depend on the markets risk sentiment today, because - surprise, surprise - Canada won't be publishing any reports again! So in the meantime, keep your eyes locked on the euro zone and the U.S.!

[PipDiddy]

Market participants were all about risk-taking yesterday as ECB President Mario Draghi said that the central bank would do everything within its power to protect the euro. The Loonie, as a result, leapt higher than the safe haven dollar and ended the U.S. trading session 56 pips higher from its opening price. The Loonie marked its second straight day of gains.

Other financial instruments reacted the same way. Euro zone bond yields have fallen, with Span’s 10-year bond yields back below the critical 7% level. The market could possibly be overreacting as euro zone’s debt problems haven’t really gone away.

No major news reports came out yesterday, and Canada’s economic cupboard will be completely empty again today. This means that the Loonie’s price action will be most likely be driven by events happening in other major economies like the U.S. and the euro zone.

[PipDiddy]

1… 2… 3! Last Friday, USD/CAD fell for the third straight day in a row as oil prices continue to climb higher. Speculation that the Fed would ease soon also added downward pressure to USD/CAD. The pair, which had begun the day at 1.0096, closed the U.S. trading session at 51 pips lower at 1.0045.

No major data was released last Friday and no report is scheduled to come again today. We will see the country’s monthly GDP report tomorrow though. It’s expected to show a 0.2% growth, slightly lower than the 0.3% rise from the previous month. Higher-than-expected figures are usually seen as bullish for the Loonie.

Also watch out for data coming out of other major economies, especially those from the U.S. and the euro zone. The non-farm payrolls that will be published on Friday, for instance, will most likely have a strong impact on the Loonie’s price action.