Daily Economic Commentary: Canada

Crude oil soared by 3.9% in yesterday’s trading to settle at $77.01 per barrel. This move helped launch the US equities markets to its best single day performance this year. The spike in oil prices also benefited the Loonie. The USDCAD fell and closed at 1.0436 from 1.0491.

Canada’s manufacturing sales have grown by 1.6% to C$43 billion in December, trumping its measly 0.1% gain during the previous month. The jump in manufacturing was led by aerospace and motor vehicles sales. Aerospace sales surged by 28% to C$1.3 billion after sliding by 17% in November while motor vehicle sales rose by 4.4% in December to C$3.64 billion. Still, the latest score is below the market’s 2.1% consensus. The USDCAD lost a bit of support following the report.

No major economic data will be released today in Canada. The Loonie, though, could sway later depending on the result of the US’s housing starts and building permits data. Strong figures in those accounts could push the Loonie higher.

After six days of winning, the Loonie finally took a breather and gave up some of its gains in yesterday’s trading session. The USDCAD ended the US trading session at 1.0464, 30 pips higher from its opening price during the Asian session.

Yesterday, the wholesales sales report for the month of December was released. It showed that sales climbed 0.7%, which was slightly higher than the 0.6% initially predicted. Still, the rise reported was at a much slower pace than November’s 2.7% gain, which kept Loonie bulls at bay.

On the docket today is Canada’s consumer price index for January. The consumer price index measures the monthly percentage increase or decrease in the average level of prices of consumer goods and services. The expectation is a rise of 0.3%, opposite the 0.3% drop seen in December. Meanwhile, the core version of the report, which excludes volatile items such as food, energy and automobile sales, is predicted to show a 0.1% uptick. The actual figures will be released at 12:00 pm GMT.

At 1:30 pm GMT, Canada’s report on international securities transaction will be released. Just like the US TIC flows, this report shows all the flows of money in and out of the country for stocks and bonds. If the report’s balance is positive, it means that more securities were sold than purchased by Canada. The consensus is a positive balance of 7.21 billion CAD in December, lower than the 10.54 billion CAD seen the month prior. Currency traders usually view a positive balance as bullish for the domestic currency because purchasing bonds and stocks of a country requires investors to buy the domestic currency first.

The USDCAD was caught on the wrong side of the fence early today after the US Fed made a surprise discount rate hike. The USDCAD soared following the surprise, and is now trading around 1.0480.

Before the Fed’s statement was made, the Loonie was actually leading the way against the dollar, as the USDCAD had just established a new yearly low. The reason why it rallied a bit was because of the the CPI figures that came out smoking hot. While monthly data came in line with expectations to show a 0.3% increase in consumer prices, the annual figure rose sharply from 1.3% in December to 1.9% in January!

Do you know the significance of this?! Well, the Bank of Canada’s inflation target is 2.0%, which means that there is that chance that the BOC will be raising interest rates sooner than expected. Still, some officials point out that the increase may be simply because of low fuel prices at the same time last year. If we do see inflation rise sharply in coming months, let’s see if this would force the BOC’s hand to raise interest rates.

In other news, Canada’s report on foreign securities purchased was released last night. The data indicated that the balance stood at 11.23 billion CAD, which beat both expectations for this month, as well as last month’s figure of 10.54 billion CAD. This indicates that demand for Canadian securities rose in past months, as traders need the CAD in order to purchase domestic securities.

We may see some more volatile moves tonight when retail sales data is released at 1:30 pm GMT. Retail sales are expected to have risen by 0.6% in month of December, while core sales – which doesnt include vehicle sales – is seen to have increased by 0.4%. This shouldn’t come as too much of a surprise – after all, it was the holiday season! Still, watch out if the reports show better than expected results. It may just give the Loonie the boost it needs to recuperate from its losses early this morning.

Unable to break above the 1.0500 mark, the USDCAD tumbled by a little more than a hundred pips to a low of 1.0389 last Friday. Although economic reports from Canada were generally weaker than expected, the CAD was still able to gain the upper hand.

Canada’s retail sales report printed a modest 0.4% rise for December, falling short of the consensus of 0.6% growth. The core retail sales showed a 0.4% increase, just as expected. Still, it’s important to note that retail sales were able to rebound from the 0.5% decline seen in November. The growth was led by a 3.3% increase in sales of general merchandisers, such as department stores.

Meanwhile, Canada’s leading index also fell short of expectations as it climbed by a mere 0.9% instead of rising by 1.1%. This leading index reading for January was also lower than December’s 1.5% rise.

Moving on to this week’s set of economic data… Well, Canada’s calendar looks a bit bare. No economic reports are due today but keep your eyes and ears open for a speech by BOC Senior Deputy Governor Paul Jenkins at 7:30 pm GMT. He is due to participate in a panel discussion at the Government of Canada and Financial Times Global Business Leaders Day Seminar and his words could contain hints on the central bank’s future monetary policy decisions.

Canada’s first economic release of the week comes on Wednesday in the form of the corporate profits report. After rising by 7.9% in the third quarter of 2009, it could post a slightly moderated increase for the succeeding quarter. Still, this report is slated to have a minimal impact on the price action of the CAD.

On Friday, we’ll take a look at Canada’s current account balance. It showed a deficit of 13.1 billion CAD in the third quarter, which could narrow down to 8.9 billion CAD in the fourth quarter. A stronger than expected figure could boost the CAD higher so watch out for the actual figure at 1:30 pm GMT.

After opening on a positive note, the loonie eventually slipped against the dollar to end yesterday’s session at a loss. The USDCAD rose to 1.0425 from 1.0389.

Bank of Canada Senior Deputy Governor Paul Jenkins said yesterday in a panel discussion at the Government of Canada and Financial Times Global Business Leaders Day Seminar that the Canadian market is robust. He also said that the economy is safe as of now from a housing bubble and that the Canadian government will form new rules to prevent such from happening.

No economic reports are due today in Canada. Though, the loonie might still experience some volatility given the top tier economic events in the UK, euro zone, and the US. Risk aversion from a likely weak German Ifo business climate and some inflation concerns on the UK could hurt the anti-dollars like the CAD.

No thanks to risk aversion, in just a single day, the Loonie gave up all of its gains from last week. The USDCAD closed the US session 1.0567, 150 pips higher from its opening price during the Asian trading session.

The likely culprits for the unexpected spark in risk aversion yesterday were the worse-than-expected results of the CB consumer confidence report from the US and the news that Greece’s top four banks have had their credit ratings downgraded.

Just like yesterday, Canada’s economic cupboard today lacks any important data. This doesn’t mean that the Loonie’s price action will be contained though! The US has some major events scheduled at 2:00 pm today, namely the release of the new home sales report and a speech Federal Reserve Chairman Ben Bernanke, which would provide some direction for the Loonie.

The Loonie recovered some of its losses yesterday, as trading wasn’t as wild as the day before. The USDCAD pair traded within its range and closed lower at 1.0511.

With everyone watching the Olympics right now, no major data has been released from Canada recently. Watch out though, for data coming out from the US today. The durable goods orders are due, while US Fed head Ben Bernanke will be speaking again. While yesterday’s reaction to Bernanke’s speech was muted, one shouldn’t take his words for granted as he may just drop a surprise or two in the markets. Be careful!

The lack of economic reports from Canada left the loonie utterly helpless against yesterday’s greenback strength. Bleak US economic reports fueled a run of risk aversion, pushing the USDCAD near the 1.0700 mark.

Today, Canada has its current account balance on tap. It could show that their current account deficit narrowed from 13.1 billion CAD to 8.7 billion CAD in the fourth quarter, reflecting an increase in exports and foreign purchases for Canadian securities. A better than expected balance could allow the loonie to bounce back from its recent fall so better keep an eye out for the actual figure due 1:30 pm GMT.

Also keep an eye out for the release of major economic reports from the US, namely their preliminary GDP reading and existing home sales report. Weaker than expected figures might ensure that risk aversion is here to stay.

The loonie got a boost last Friday to end positively against the greenback. The USDCAD fell and settled at 1.0525 from 1.0593.

The CAD still managed to register some gains last Friday despite the worse-than-expected Canadian current account balance. Canada’s current deficit came in at –C$9.8 billion during the fourth quarter versus the –C$8.7 billion forecast. Its previous reading was also revised down to –C$13.8 billion from –C$13.1 billion.

Today (1:30 pm GMT), Canada’s annualized 4Q GDP will be released. Canada’s economy is seen to have expanded by 0.4% in December which would translate to an annualized 4.0% growth during the last quarter of 2009. Such growth could definitely give the CAD some additional support.

Tomorrow, it will be the BOC’s turn to decide on its interest rate. While the bank is still expected to maintain its rate at 0.25%, a strong GDP reading could spark some speculation that the bank would raise its rates sooner than later.

Come Thursday, both Canada’s building permits and Ivey PMI will be reported. Building permits are projected to print a 1.1% growth after already gaining by 2.4% during the month prior. The Ivey PMI, on the other hand, is projected to be at 56.0 from 50.8.

From the looks of it, things are looking up for Canada and the loonie at least for the first week of March.

Unlike the major European currencies, the Loonie was actually able to post some significant gains and kick off the week on a firm note yesterday. The USDCAD found itself at 1.0414 by the end of the US trading session, almost 150 pips lower from its Asian session opening price.

The Loonie drew much of its strength from the positive reading on Canada’s GDP report. The report showed that the country’s economy grew 0.6% in January, higher than the 0.4% expansion seen in December. The optimistic results of the GDP report gave currency traders reason to believe that the Bank of Canada could tighten monetary policy sooner, which provided support for the Loonie.

Like I mentioned yesterday, watch out for the BOC’s interest rate decision at 2:00 pm GMT later on. Although the bank is widely expected to keep rates unchanged at 0.25%, I’d keep an ear our for the accompanying statement. Any hint that the bank could raise rates earlier than expected could send the Loonie back to February highs. We all know how currency traders react to rate hike speculations!

The CAD made another convincing run against the dollar yesterday, as the USDCAD closed lower for the third straight trading day. The pair closed at 1.0365. Is it aiming for 2010 lows at 1.0225?

While the Bank of Canada kept rates at 0.25% yesterday, sentiment towards the Loonie was still high as it appears that the central bank has backed off on their stance to keep interest rates low until mid 2010. The BOC pointed out that growth and inflation have beaten their forecasts, which could signal a sooner than expected rate hike. Coupling this with improving labor conditions and a rising housing market, these might be reason enough for the BOC to hit the markets with a rate hike sometime in the next couple months.

No economic reports coming out from Canada today. Be informed however, that the US session is jam packed with data from the US, so watch out for that.

The Loonie made headway against the greenback in yesterday’s trading as the USDCAD dipped to a low of 1.0275. Even though Canada didn’t release any economic reports, the Loonie was able to take advantage of the surge in risk tolerance.

Thanks to US economic reports which came in slightly better than forecasts, two of the commodity-based currencies, namely the Aussie and the Loonie, strenghtened yesterday.

Canada will release a couple of top-tier economic reports today, which are the building permits and Ivey PMI. Data on building permits, which is due 1:30 pm GMT, could print a 1.0% increase for the month of January. This would be a smaller uptick compared to the 2.4% growth seen in December.

Later on, the Ivey PMI will be reported at 3:00 pm GMT. It could show that the index leaped from 50.8 to 56.0 in February, reflecting a surge in business sentiment. Better than expected figures could push the USDCAD even lower unless other economic reports from the US create a drastic change in risk sentiment.

The Loonie managed to edge the dollar for the fifth straight time yesterday. The USDCAD fell and closed at 1.0306 from 1.0319.

Canada released a couple of tier 1 economic reports yesterday. First was Canada’s building permits which unexpectedly slid by 4.9% in January. Its December figure was also revised down to -2.7% from an uptick of 2.4%. Next was the Ivey PMI which also came in well below the 56.0 estimate with only a 51.9 score.

The Loonie lost a bit of support following as soon as the weak figures above got out but it eventually settled flat to close the day.

No economic reports are due today in Canada. Volatility, however, is still expected to pick up with the upcoming release of the US NFP report later at 1:30 pm GMT.

Unlike its fellow commodity-based dollars, the Loonie was unable to post significant gains on the dollar last Friday. It closed the day at 1.0306, exactly the same as its opening price during the Asian session that day.

Some analysts say that the Loonie rally early last week capped any possible gains it could have gain on Friday. Despite the Loonie’s inability to appreciate alongside its comdoll friends last Friday, the overall trend shows that the bias is still buying… errrr, Loonies.

The report on Canada’s housing starts at 1:15 pm GMT today will kick off the week. The report measures new residential buildings that started construction for a given period. Housing starts for February is estimated to be at 188,000 (annualized), slightly higher than the 186,000 seen in January.

On Thursday, at 1:30 pm GMT, Canada’s trade balance will be released. The trade balance measures the net difference in value between exported and imported goods. The forecast is a positive balance of 400 million CAD. A positive balance is called a surplus, which means the value of goods exported were higher than the value of goods imported. A surplus is usually seen as bullish for the domestic currency because foreigners first need to buy the local currency to import from the country

On Friday, at 1:00 pm GMT Canada’s version of the US non-farm payrolls report is due. The report is expected to show that 17,500 net jobs were added in February, much lower than January’s 43,000 figure. Meanwhile, Canada’s unemployment rate covering the same period is predicted to have remained at 8.3%.

After gapping lower to start the week, USDCAD trading was pretty quiet yesterday. The pair finished just 8 pips lower, to end the day at 1.0277. Could the CAD’s bullish momentum be slowing down?

The CAD was unable to make any nice gains despite better than expected results from housing starts data that was released yesterday. The report came out to show that the annualized rate of housing starts was at 197,000, slightly higher than the projected 188,000 figure. This was the third straight month that rate beat consensus.

Nothing major coming out over the next few days, so we could see more range trading take place.

Despite the lack of economic reports from Canada and the US, the loonie was able to edge higher against the greenback during yesterday’s trading. In fact, the USDCAD slid by 85 pips from a high of 1.0321 to a low of 1.0236 during the US session.

Canada won’t be releasing any top-tier economic reports again today, which means that commodity prices could dictate the price action of the loonie. Of course, watch out for economic reports that could trigger a shift in risk sentiment. Keep an eye out for the rate decision from the RBNZ since a rate hike could pull up the commodity-based currencies.

The Loonie’s price action was like a roller coaster ride yesterday. It opened up weak but was bought up during the start of the European session. Buyers continued to scramble for it when the news that Greece’s debt problem is ‘over’ came out. Investors then quickly took their profits which of course pushed the currency back near to where it initially opened.

No economic reports were due in Canada yesterday. As I’ve mentioned earlier, the Loonie’s movement was particularly affected by the news that came out of Greece.

Today (1:30 pm GMT), Canada’s trade balance and NHPI will be on deck. The country’s trade balance is expected to improve to C$0.3 billion in January from –C$0.2billion while its house price index for the same period is also seen to have gained by 0.5% on top of the 0.4% rise it had during the month prior. Positive results from these accounts could further boost the Loonie’s short term valuation.

The Loonie’s price action yesterday turned out to be a woozy! After bouncing around in a tight 20-pip range during the Asian trading session, the USDCAD simply blew up once the US trading session rolled along. The USDCAD went as high as 1.0320 before giving up all of its gains to close the day at 1.0239.

Canada’s trade balance which was released yesterday came out with an upside surprise. Thanks to an unexpected uptick in exports, the trade balance reported a surplus of 800 million CAD in January, more than double the 300 million CAD surplus initially expected. Remember, a surplus balance means that value of goods exported is greater than the total value of goods imported. A rising surplus is usually seen as bullish for the domestic currency because foreigners must first buy the local currency, in this case the Canadian dollar, in order to purchase the country’s exports.

Canada’s new housing price index didn’t share the same optimistic tune though. The index revealed that the selling price of new homes only increased 0.4% in January, instead of 0.5%.

On the docket today, at 12:00 pm GMT, is Canada’s numbers on its labor market. The country’s employment change report, which measures the change in the number of people employed per month, is expected to show that a net number of 17,500 jobs were created in February. Meanwhile, Canada’s unemployment rate covering the same period is expected to remain unchanged at 8.3%.

Sniff, sniff… Is that, parity the CAD bulls are smelling?! The USDCAD just broke though key support at 1.0200 last Friday! Is it just a matter of time till we see the magical 1.000 level?!

CAD buying surged once employment figures released showed better than expected results. The data showed that 20,900 jobs were added to the economy last month, slightly more than the anticipated 17,500 figure. Furthermore, the unemployment rate dropped from 8.3% to 8.2%!

This just adds to the speculation that the Bank of Canada will be raising interest rates sooner than expected, despite comments by BOC officials that they will keep rates at current levels until June at the earliest. Let’s see how this plays out over the next couple of months.

This week, we’ve got manufacturing and whole sale sales on deck. Sales on the manufacturing level are expected to have risen by 0.7% last January, down from 1.6% in December. Meanwhile, wholesale sales growth is predicted to have remained steady at 0.6% growth in the same month Still, given the recent run of goods news from Canada, we may just be in for an upside surprise…

The key data to look out for is on Friday, when the CPI figures and retail sales data are on deck. Core CPI (the account that measures the change in consumer prices excluding the eight most volatile items) is expected to show that prices rose by 0.3% in February, up from the 0.1% pace in January. At the same time, core retail sales (which is retail sales less automobile-related sales), is seen to have risen by 0.5% in January.

If these figures do come in higher than anticipated, it could just spark the CAD to continue its run to parity. Take note, the BOC considers the rate of inflation when deciding upon the interest rate. If there are signs that inflation is rising more quickly than expected, it may just give incentive for the BOC to hike interest rates in order to avoid a surge in inflation.

Well, the loonie’s winning streak had to end sometime, didn’t it? After almost two weeks of gaining against the greenback, the loonie took a breather yesterday, causing the USDCAD to climb to a high of 1.0233.

Only the motor vehicle sales report was released from Canada yesterday. The report showed that sales of automobiles stayed flat in January, just as expected. Still, the loonie easily caved to greenback pressure as traders anticipated a hawkish FOMC statement for today. Keep an eye out for that at 6:15 pm GMT.

Canada is set to release its labor productivity report for the fourth quarter of 2009 at 12:30 pm GMT today. The report could print a 0.7% uptick in productivity, up from the 0.3% decline seen in the previous quarter. However, counter-intuitive as this may sound, higher productivity doesn’t necessarily bode well for the economy. Having more productive workers usually implies that companies won’t need to raise wages or hire new employees. A weaker than expected figure could then keep the loonie afloat.

Also due today is Canada’s manufacturing sales report, which could churn out a 0.7% increase. This would be a slightly moderated growth, almost half of the 1.6% rise seen in December. Still, if the actual figure beats the consensus, the loonie could resume its rally.