Daily Economic Commentary: Canada

For the second day in a row, the CAD gave up minimal gains, as dollar strength was seen across the board. The USDCAD closed at parity 1.000 and remained its daily range of 90 pips. With it being a Friday, could we be in line for some profit taking today from all those CAD bulls?

Canada’s leading index came in better than anticipated yesterday, rising by 1.0%, after consensus was for an increase of 0.8%. This wasn’t too surprising – after all, Canada’s economy has been on a romp lately, which has caused even the Bank of Canada to be more optimistic…

Speaking of the BOC…

The BOC released its quarterly monetary policy report yesterday and once again reiterated statements from earlier this week that it may be time to start withdrawing economic stimulus measures. Remember, earlier this week, the USDCAD dropped by over 100 pips once news broke out that the central bank would most likely hike interest rates before the end of the second quarter.

While yesterday’s statements didn’t provide any definite dates as to when the cash rate will be raised, chances are we might not see as strong reactions to interest rate rumors as we have seen in the past. As my buddy Forex Gump said in a recent post, the markets have probably started pricing in potential rate hikes, and we could see the USDCAD continue to hover around parity.

With that said, we could see some strong moves tonight, as we’ve got some top tier data coming out. First, at 11:00 am GMT, monthly consumer price index figures will be released. Forecasts are for a rise in the prices of consumer goods by 0.2% last month, while core data – which excludes the eight most volatile items – is seen to have risen by 0.1%. If we see more confirmation that inflation is on the rise, it would give even more reason for the BOC to hike rates sooner rather than later.

Later on, at 12:30 pm GMT, we’ve got retail sales figures on the docket. Headline retail sales are expected to have grown by 0.9% in February, while core sales (which doesn’t include automobile sales) are projected to have risen by 0.7%. Better than anticipated retail sales figures could give CAD bulls the energy it needs to take the USDCAD pair to a new yearly low.

After the USDCAD hit a high of 1.0066 last Friday, the loonie put up a valiant fight and struggled to land back below parity. Would it be able to stay below the 1.0000 handle this week?

First, a brief glance back at the inflation reports released before the weekend. Both the CPI and the core CPI were disappointing as they failed to meet expectations. The CPI fell flat while the core CPI, which excludes volatile items, posted a 0.2% decline. This caused Canada’s annual inflation rate to dip from 1.6% to 1.4% in March, making it less likely for the BOC to hike interest rates in their next policy meeting in June.

This week, only one economic report is due from Canada and that’s their GDP reading for February. After printing a 0.6% expansion in the previous month, the Canadian GDP is expected to post a 0.5% growth for February. A stronger than expected results could give the loonie enough energy to rally. Watch out for the actual figure on Friday 12:30 pm GMT!

Also, keep your eyes and ears open for BOC Governor Mark Carney’s speeches this week. Now that Canada’s inflation reports have been released, the central bank head could give more concrete details about their future policy moves. He is scheduled to testify 7:30 pm GMT tomorrow and 2:30 pm GMT on Thursday.

Trading of the Loonie was thin yesterday due to the absence of major economic flows from Canada and the other major economies. The USDCAD tiptoed around its parity line and eventually closed slightly higher at 1.0013 from 0.9998.

Today at 7:30 pm GMT, Bank of Canada Governor Mark Carney will testify before Canada’s House of Commons Standing Committee on Finance regarding the present situation of the country’s economy. It would be interesting to see if he would follow up on the bank’s bullish statements that it released during its last monetary policy decision. Previously, the bank said that it was considering a rate hike in the foreseeable future. It also upgraded its economic growth forecast for this year and the next. Any hints of a future monetary tightening in the governor’s upcoming testimony, then, would more likely send the Loonie higher.

Ouch. In just one day, the CAD gave up all of the gains it had over the USD this April. The USDCAD ended the US trading session at 1.0177, almost 200 pips higher! Hah, looks like the CAD won’t be ending this month with a bang.

Apparently, all the negative news from euro zone gave a chance for risk aversion to revisit the markets again. Greece’s debt drama series, which has been a hot topic among currency traders again recently, took another turn for the worse when the International Monetary Fund came out with a statement saying that they need to provide another extra 10 billion EUR for Greece. Needless to say, the CAD took a major hit and experienced a sell-off.

No important data on Canada’s economic calendar again today, but that doesn’t mean that we won’t be seeing some fireworks! Tonight, the FOMC will announce its decision on interest rates, which would have a serious impact on the foreign exchange market. Watch out if the FOMC keeps its commitment to keep rates low for an “extended period” later… Because if the FOMC decides to drop “extended period” from its statement, we might be in for some serious CAD selling… or USD buying for that matter.

A day after rising over 150 pips, the USDCAD gave back half of its gains as commodity trading picked up yesterday. The pair dropped about 80 pips from its opening price to end the day at 1.0090.

Even though trading was one directional, there was nothing really surprising with the USDCAD’s drop, as it was roughly equal to the pair’s average true range of just under 90 pips. It probably got a boost from increased risk appetite, as well as rising oil prices. Remember, with oil being one of Canada’s major exports, we could monitor the prices of crude oil and use it as an indicator to trade the CAD.

Tonight, Bank of Canada Governor Mark Carney will be speaking before the Senate Committee on Banking, Trade and Commerce. Be on the lookout for more hawkish statements, especially since the BOC has become more optimistic over the state of the Canadian economy. He may reiterate comments about rising inflation, which could fuel even more speculation by traders that the BOC will be raising interest rates sooner than expected.

After hitting a high of 1.0198 this week, the USDCAD fell closer and closer to the 1.0000 handle in the past couple of days. Canada didn’t release any economic reports yesterday but the Loonie’s recent rally suggests that traders could be anticipating some good news from Canada today.

Would Canada’s GDP once again result to an upside surprise? Their February GDP reading, which is due 12:30 pm GMT today, could show that the Canadian economy expanded by 0.5% during the month, slightly lower than the 0.6% growth seen last January. But seeing how Canada’s monthly GDP reading has been posting better than expected results since November, there could be a chance that the February figure beats the consensus yet again. If it does, the USDCAD might make it all the way below parity to retest its former lows.

Also due from Canada today are its raw materials price index and industrial product price index, both of which are leading indicators of consumer inflation. Prices of raw materials are expected to be up by 0.9% while industrial product prices could post a 0.2% uptick for February. Watch out for those reports at 12:30 pm GMT.

If the greenback was Floyd Mayweather, then the Loonie would be Sugar Shane Mosley since it got beat up miserably last week. By the end of Friday’s match, the USDCAD moved farther away from parity and closed at 1.0157.

Canada’s GDP figure for February failed to hit the consensus of a 0.5% expansion and posted a mere 0.3% uptick instead. Although this marks the sixth consecutive month that the Canadian economy has posted positive GDP growth, traders seemed disappointed as they sold off the Loonie after the report. On top of that, BOC Governor Mark Carney’s cautionary comments made it more difficult for the Loonie to stay afloat. According to him, the Greek debt crisis could have a negative impact on Canada if borrowing costs all over the globe climb higher in reaction to Greece’s need to secure more funds.

Now let’s shake off those negative vibes and focus on what’s in store for Canada this week. The first half of the week looks like a light one for the Loonie since Canada won’t be releasing any reports until Wednesday. By Thursday, Canada will release its building permits data which could print a 0.4% rebound in March, following February’s 0.5% decline. Also due Thursday is the Ivey PMI, which could show that the manufacturing industry expanded again in April.

On Friday, we’ll be seeing Canada’s employment report by 11:00 am GMT. It could post another increase in hiring for the month of April, reflecting the strength in Canada’s labor market. A total of 20.3K jobs are expected to be added during the month and this could keep the unemployment rate steady at 8.2%. Although stronger than expected results could allow the Loonie to zoom back to parity against the greenback, the non-farm payrolls report from the US might also have a say on the USDCAD’s price action on Friday.

The Loonie kicked off the week on a strong note yesterday, rallying against the greenback throughout the European and US trading sessions. The USDCAD ended Monday at 1.0105, 70 pips lower from its week open price.

It seems like the prospect of a rate hike from the Bank of Canada, as well as Canada’s better economic standing than the US, will continue to cap any rallies on the USDCAD.

No data coming out from Canada again today, but the Reserve Bank of Australia’s interest rate decision later could indirectly affect the Loonie’s price action. If the RBA hikes rate as expected, we could see the Loonie edge up higher against the greenback once again.

You know it’s risk aversion in play once you see the USDCAD rise by almost 150 pips from its opening price. With the USD rising across the board and oil prices falling, the USDCAD hit a 5 week high to close at 1.0249.

With no major data on the [=&currency[]=CAD&currency[]=GBP&currency[]=JPY&importance[]=&importance[]=3&importance[]=2&importance[]=1&display=daily"]economic menu](Forex Economic Calendar[) for today, we could see the CAD continue its losses should risk aversion remain in vogue. I’d keep an eye out for any news from the euro zone. It seems that their debt issues are at the center of this run to safety. If we see more sell offs in the EURUSD, this could once again lead to another dollar rally, which in turn could alter trading in other currency pairs.

Dementors seemed to enjoy hanging out in the markets since they continued to spread fear and suck the risk appetite from investors. This pushed commodity prices even lower, dragging down commodity-based currencies such as the Canadian dollar.

The Canadian dollar hit a 2-month low against is North American rival, the US dollar, as US economic data came in stronger than expectations. Canada didn’t release any economic figures yesterday, leaving their currency with nothing to draw strength from.

Today, Canada is set to release its building permits data and Ivey PMI. Building permits could bounce up by 0.6% in March after sliding by 0.5% in the previous month. Meanwhile, the Ivey PMI could dip from 57.8 to 57.7 in April, implying that the expansion in Canada’s manufacturing industry slowed down a bit during the month. Watch out for these reports at 12:30 pm GMT and 2:00 pm GMT respectively since stronger than expected figures could provide the Canadian dollar some support.

Risk aversion, this time stemming from user-error, pushed the Loonie almost 400 pips lower yesterday. From its Asian session opening price of 1.0297, the USDCAD reached as high as 1.0741 before settling at 1.0521 at the end of the US trading session.

Most of the day was characterized by risk aversion from euro zone contagion fears, which was later exacerbated by the news that a large trading desk erroneously sold $16 billion worth of future contracts. The building permits report, which came out better-than-expected (12.2% actual vs. 0.6% consensus), took a back seat because of the news.

For today, watch out for Canada’s employment data at 11:00 am GMT. The expectation is that the country’s unemployment rate remained at 8.2% in April, and that an additional 20,000 jobs were created on top of the 17,900 seen the previous month. This is good news for Canada, which could provide the Loonie with some much needed buying support later.

Ka-chow! Thanks to some good employment data, the CAD came storming back! After hitting a high of 1.0741 last week, the USDCAD was able to close out the week at 1.0440.

Can you hear all that noise? It looks like the Great White North had a party last weekend. How come? Well, 108,700 jobs were just added to the economy last month! Yeahhhh mannnn! This beat forecast of a rise of just 24,300, and marked the largest gain in employment EVER! Meanwhile, the unemployment rate fell to 8.1%, down from 8.2% the previous month.

Rising inflation? Check! Good economic data? Spot on! Now, improving labor market? Hmmm… we may just see the Bank of Canada raise interest rates next month if this keeps up!

The only red flag I see today is the housing starts report due at 12:15 pm GMT. The annualized pace of housing starts is expected to remain steady at 200,000. If however, we see a better than anticipated figure, it may just send the USDCAD back to parity!

The Loonie chalked up some gains against the US dollar yesterday, bringing the USDCAD below the 1.0300 handle. Investors seem to have gotten their risk-taking groove back, pushing the com-dolls slightly higher. Would the Loonie sink or swim today?

Only the housing starts report was released from Canada yesterday. The report showed that housing starts edged up by 1.3% in April to an annualized 202K increase in new home construction. This adds to signs that the Canadian housing sector is now getting back on its feet. Still, the actual results for April came in slightly less than the estimated 203K rise in housing starts.

Moving on to today’s economic schedule… Canada has no economic reports in store for today, which means that the Loonie could be extra sensitive to changes in risk sentiment.

The lack of economic flows pretty kept the Loonie moving within a tight range yesterday. The USDCAD ended the US trading session at 1.0217, just a mere 25 pips lower from its Asian session opening price.

Canada will be releasing a couple of important economic reports today so the Loonie could prove to be a little bit more volatile than yesterday. Specifically, at 8:30 am GMT today, Canada’s new housing price index(NHPI) and trade balance are scheduled for release.

The new housing price index, which measures the monthly average change in selling price of new houses, is predicted to show a 0.3% rise March-on-February, better than the 0.1% increase seen period before. Rising house prices are typically seen as positive for the domestic currency, because it attracts businesses to invest in the housing industry.

Meanwhile, the country’s trade balance, which measures the net difference in value between imported and exported goods, is expected to show a 1.6 billion CAD surplus for the month of March. This means that analysts believe that more goods were exported than imported, and that demand for Canada’s exports picked up.

If the actual results of the reports later were to come in higher-than-expected later, expect to see the USDCAD to be sold off, as it would once again highlight Canada’s much better economic standing than the US.

Another quiet day for Loonie trading, as the USDCAD traded within a range of just 80 pips. The pair eventually closed just below the 1.0200 handle, down 20 pips for the day.

The new housing price index came in to meet expectations, indicating that housing prices rose by 0.3% from February to March. This is yet another positive sign for the Canadian economy, as improvements in the housing industry generally lead to more business activity.

Meanwhile, trade balance figures were quite disappointing, as a surplus of 300 million CAD was posted in March. Apparently, exports were hurt by a dip in energy prices. Still, some experts don’t believe that this may be just a one-month anomaly, and expect larger surpluses to be posted in the following months.

Looks like we’ve got nothing scheduled on the economic calendar for today, so it may be another day to sit back, relax, and watch the NHL playoffs… Gotcha! Who I am kidding! This is the currency markets I’m talking about, where sentiment can shift on a dime! Better stay on your toes and keep your risk management rules in check as you never know what may hit the markets!

After starting off on the wrong foot during the Asian session, the Loonie fought back and struggled to erase some of its earlier losses. At the end of the scuffle, it closed at 1.0147 against the greenback.

Canada didn’t release any economic reports yesterday, leaving the Loonie vulnerable when risk aversion came back into play. Today, Canada’s manufacturing sales report is due 12:30 pm GMT. The report is projected to show that manufacturing sales surged by 1.1% in March, following a measly 0.1% uptick in February. Stronger than expected results could give the Loonie enough energy to push for more gains.

Also, keep an eye out for the release of top-tier reports from the US, namely their retail sales, industrial production, and consumer sentiment data.

Like all the other commodity-based currencies, the Loonie bowed down to the strength of the dollar last Friday. The USDCAD, which opened Asia at 1.0204 that day, surged up to close the US trading session at 1.0317.

There are two important pieces of data to keep an eye for this week, both of which will be released on Friday.

The first one is Canada’s consumer price index at 1:00 pm GMT. It is expected to show a 0.3% uptick in consumer prices April, which would be an improvement from March’s flat reading. Rising CPI is usually seen as bullish for the domestic currency, because it could lead the central bank to control inflation by hike interest rates in the future.

The second one is Canada’s retail sales report. The report, which measures the monthly average change in retail sales, is predicted to show a rise of 0.2%. Meanwhile, the core version of the report that excludes automobile sales in its computation is anticipated to show a 0.5% climb.

The USDCAD surged higher early in yesterday’s Asian session, as more euro selling helped pushed the dollar higher. Luckily for all those CAD bulls, risk appetite improved throughout the day, which allowed to the USDCAD to finish lower at 1.0337.

CAD buying got a nice boost as risk appetite got nice boost on news that the ECB purchased 16.5 billion EUR worth of bonds last week. This was seen as a sign that the ECB is being more proactive in nipping Greek debt issues on the bud. As you can see, everyone is focusing on news across the Atlantic. As concerns grow regarding the euro zone’s stability, risk aversion has been rearing its head back into the markets, which has had a negative impact not only on European currencies, but on com-dolls like the CAD and AUD. Make sure you keep an ear open for any news coming out of Europe, as it will probably remain as a major market mover in the coming weeks.

Tonight at 8:30 pm GMT, international securities transaction data is due. This data measures the amount of Canadian securities that were purchased by foreigners in the report month. Word is that foreigners bought 6.42 billion CAD worth of Canadian stocks and bonds in March. Still, I wouldn’t be surprised if this figure comes out a little bit higher, considering how bullish traders have been on the CAD as of late.

The Loonie lost to the greenback in another round of risk aversion yesterday when ongoing problems in the euro zone sparked a flight to safety. This caused the USDCAD to climb from the 1.0250 area and close at 1.0338.

A weaker than expected foreign securities purchases report also weighed the Loonie down yesterday. Instead of landing at 6.42 billion CAD in March, net purchases of Canadian securities turned out negative during the month. The actual figure slid sharply from 6.74 billion CAD in February to -0.62 billion CAD, indicating that foreigners dumped most of their Canadian assets then. At the same time, Canadians began to load up on US securities in March, leading to a net outflow of funds from the Canadian markets.

Today, Canada is set to release its wholesale sales report at 12:30 pm GMT. After seeing a 1.2% decline in February, wholesale sales could post a 0.3% uptick for March. Being a leading indicator of consumer spending, a better than expected figure could allow the Loonie to bounce back from its poor performance yesterday.

Two hundred and thirty pips – that’s how much ground the CAD gave up against the USD yesterday. The combination of risk aversion, the weakening of the AUD, debt contagion fears, and the speculation of the BOC delaying its rate hike gave the CAD bears more fuel to take the currency lower across the board.

Even strong data from Canada’s leading index was unable to halt the CAD’s sell-off! In any case, there are two red flags on Canada’s economic calendar today.

The first one, which is the consumer price index, comes out at 11:00 am GMT. It is expected to show a 0.2% increase in April, opposite the flat reading from the month before.

The second one comes in the form of the retail sales report. It is predicted to show that the pace of growth in retail sales slowed down to 0.2% in March from 0.5% seen the previous month. The core version of the report covering the same period, on the other hand, is anticipated to reveal a rise of 0.5% from -0.1%.

Could the positive expectations on the report help the CAD regain some of its losses? Also, with the USDCAD finding resistance at the 1.0700-1.0750 region, could we see a retracement today? Remember, it is a Friday and traders eventually need to take profit sooner or later! We’ll all just have to wait and see…