Daily Economic Commentary: Canada

[ForexGump]

Daily Economic Round Up of data from Canada!

[ForexGump]

The “Loonie” held a reserved tone yesterday as it traded in a very tight 90 pip range. Absence of economic data from Canada didn’t kept volatility muted all throughout the trading session.

Expect to see Canada’s gross domestic product later at 12:30 pm GMT. As the broadest measure of a country’s economic health, investors and traders will surely be watching results on this report. The prediction is that Canada’s economy shrunk by 0.1% in April. Despite the negative figure, this is an improvement from March when its economy contracted by 0.3%.

[ForexGump]

Economic activity in Canada was down by 0.1% in May, exactly as expected. This marks the ninth month in the decline of Canada’s GDP. The components of the GDP show that the decline was largely a result of falling output in retail, manufacturing, and energy industries.

Raw materials prices posted a 2.2% increase after declining by 0.3% in the previous month. Industrial product prices, on the other hand, saw a 1.1% drop. Analysts expected April’s 0.5% decline in industrial product prices to be followed by a mere 0.4% slide. The USD/CAD stayed in consolidation before and after these reports only to shoot up as a result of the USD rally at the end of the day.

Canada takes a holiday today, leaving the USD/CAD under the command of risk sentiment resulting from major economic reports from the US.

[ForexGump]

Yesterday was a banking holiday in Canada, but that didn’t stop the CAD from rallying against the dollar.

As expected, the pair was exposed to a shift in risk sentiment, which is what we saw yesterday as the there was a strong USD sell-off (most probably due to the worse than expected ADP Non-farm Employment figures?). The pair also hit technical resistance at 1.1650 and as a result the USDCAD hit a weekly low as it dropped 140 pips from its opening price to close at 1.1493. Another thing to note is that US crude oil prices are back above $71 per barrel. If we see oil prices continue to climb, we may see the CAD continue to rise.

Nothing coming out from Canada the rest of the week. CAD pairs will still remain subject to shifts in risk assessment coming from releases of major reports, more specifically those from the US.

[ForexGump]

The USD/CAD traded above 1.1600 after the weaker-than-expected NFP report brought risk aversion back to the markets. Because of renewed USD strength, gold prices have dropped to $66.67 per ounce, signaling that further weakness may be in the cards for commodity currencies.

Canada’s economic calendar is report-free today. Volatility should be pretty light since US commodity markets are closed in observation of the July 4th holiday. The USD/CAD could continue to rise as an aftermath of yesterday’s strong USD rally.

[ForexGump]

If the CAD was a beer, it would be “light.” That’s exactly how the CAD was last Friday as it crawled its way through a 90-150 pip range. You might wonder if the CAD took a pint more of those pale ales to end up ‘mixed’ and crawling.

The market, but not the bars, was silent in Canada last Friday. The Canadians most likely took out their Labatt Blue and Molson Dry to celebrate their ‘brother’s’ independence day as well.

Today will be a ‘free’ day once again since no economic updates are due in Canada.

Cheers! Á votre santé!

Expect another ‘light’ CAD throughout the day.

[ForexGump]

Risk aversion set the stage for investors to push the CAD lower versus the USD early during the Asian trading session. The CAD’s defeat did not last long though, as CAD bulls managed to buy up the currency back to its opening price levels as the US trading session went by. The move was most likely caused by risk sentiment and technicals as Canada’s economic bag was completely empty.

Two reports due for release today: Canada’s figure on building permits for May at 12:30 pm GMT and the Ivey purchasing managers’ index for June at 2:00 pm GMT. Building permits probably increase by 0.8%, an improvement from last reporting period’s -5.4%. The Ivey PMI is also expected to share the same positive tone. It is expected to rise to 50.4 from May’s reading of 48.4.

[ForexGump]

It appeared that the Canadian dollar was going to continue its run against the USD, as price action hit 1.1550 before reversing as risk aversion prevailed and dollar rallied. The pair eventually closed much higher at 1.1662.

Despite the despite good data coming out yesterday, the CAD could not overcome USD strength. Building permits rose by 14.8% from May to April, after it was expected that it would rise by only 0.8%! Also, the Ivey PMI – an index that measures purchasing manager’s sentiment on the current and future outlook of the economy – had a reading of 58.2, much higher than the expected reading of 50.4 and a strong rise from the May’s reading of 48.4.

It appears that risk aversion is the current market theme. With oil prices continuing to fall (now at 63.05 USD per barrel), we may see some CAD weakness in the short term.

No economic releases scheduled for today. Tomorrow however, the Housing Starts report will be released at 12:15 pm GMT. Could we be in line for some more good data from the housing industry?

[ForexGump]

Holy ranges! The lack of hard-hitting economic data from US and Canada sent the USD/CAD bouncing up and down from support and resistance levels yesterday. Despite the surge in risk aversion and the slide in commodity prices, the CAD refused to slump as much as the other comdolls did.

Much of the CAD resilience can be accounted for by the IMF's upgrade in Canada's economic growth forecasts. The IMF expects economic activity in Canada to be up by 1.6% in 2010. This optimistic outlook offset the negative impact of oil prices, which fell below $62 per barrel.

A report on housing starts is the only entree in today's menu. Analysts expect this figure to rise from 128K in May to 131K in June. Strong housing data, coupled with the recent improvements in manufacturing data, should reduce the chance that the BOC adopts quantitative easing measures. The report on housing starts is due at 1:15pm GMT.

[ForexGump]

The CAD was trading within its range throughout yesterday until the mid-part of the US session when it suddenly kneeled before the other big boys from Europe. It lost 251 pips against the GBP yesterday to close at 1.8997. It also lost 102 pips versus the EUR to close at 1.6227. The theme ‘Holy Ranges’ managed to hold true, however, for the USD/CAD and NZD/CAD pairs.

Canada’s housing starts came in well above expectations at 141,000. The annualized number of new residential buildings that began construction during the previous month was only expected to rise by 1,000 from the last period’s count of 130,000. The surprise increase in the figure usually should give support to the CAD. This, however, wasn’t the case as the CAD even lost ground against some of the other players.

We might see some volatile CAD actions with the release of Canada’s latest employment change, unemployment rate, trade balance, and NHPI.

Canada’s labor market is seen to weaken further (unemployment rate to rise to 8.7% from 8.4%) and its negative trade balance to balloon to C$0.5 billion from C$0.2 billion. The CAD might once again lose further ground if these negative expectations come into fruition.