Daily Economic Commentary: Canada

[PipDiddy]

The Loonie is 3-up this week against the dollar, paring some of its losses last week. Yesterday, the USDCAD fell to a low of 1.0595 before closing at 1.0637.

Market participants focused more on the Fed’s interest rate decision yesterday. As expected, the Fed decided to keep its interest rate unchanged at 0.25%. It also said that it will hold it as is for an extended period until the economy shows more signs of recovery. The action is bearish for the USD which goes to the benefit of the other higher yielding currencies like the CAD. The 1.0% gain in oil prices also helped buoy the Loonie. Oil settled at $80.36/barrel after yesterday’s trading.

Data on Canada’s building permits and Ivey PMI will be published today. Building permits, which is expected to rise by 1.4% in September after surging by 7.2% during the month prior, will be released at 1:30 pm GMT. The Ivey PMI, however, is seen to decline to 60.1 in October from 61.7. The account will be made public at 3:00 pm GMT. We could see a mixed CAD trading given these expectations in the upcoming accounts.

[PipDiddy]

Despite better-than-expected results from economic data released, the Loonie maintained its sideward movement for the second day yesterday as traders sit on the sidelines and await the results of the upcoming US NFP report.

The building permits report for September, which is used as a leading indicator for upcoming constructing activity, grew 1.6%, slightly higher than the 1.4% consensus. Residential permits, which make up a significant chunk of building permits, rose a whopping 9.4% indicating improving consumer demand for housing.

The Ivey PMI for October released yesterday also shared the same optimistic tone as it printed a reading of 61.2, much better than the 60.1 expected. However, it was slightly lower than September’s 61.7 reading. The Ivey PMI is a survey which tries to assess whether industries are expanding or not through the use of a 0-100 boom/bust scale. A reading above 50 indicates expansion.

On deck today at 12:00 pm GMT is the report on Canada’s labor market. The estimate is that 10,000 net jobs were added in October. Still, joblessness is expected to have risen to 8.5% from 8.4% indicating that not enough jobs are being created.

Also watch out for the NFP report coming out of the US today as it could provide the spark the Loonie needs to break out of its 80-pip trading range.

[PipDiddy]

The Loonie got hit by poor employment data from both the US and Canada. This pushed USDCAD much higher to end the week, leaving the pair to close at 1.0752.

The Canadian economy lost 43,200 jobs in October, bringing the unemployment rate back up to 8.6%. This was disappointing, as it was expected that 10,000 jobs would be added after there was a net positive gain in employment the past two months. Furthermore, this run of job losses erased all the gains made during the previous month. If employment continues to be unstable, could this keep the Bank of Canada from withdrawing stimulus sooner?

Tonight, some housing data will be available as the housing starts report will be released at 1:15 pm GMT. The report – which measures the annualized rate of new homes that started being built last month – is expected to show that the rate increased to 157,000, up from 150,000 the previous two months.

No data on deck until Friday, when trade balance figures are due. After all the high impact data last week, could we be in line for some ranging this week before the report comes out? We shall see!

[PipDiddy]

Thanks to USD weakness, the USDCAD tumbled below the psychological 1.0600 mark and reached an intraday low of 1.0555. The pair edged even lower as the CAD drew strength from the rise in commodity prices and the improvement in Canada's housing starts.

October housing starts stood at 157K, marking its highest level since January this year. Construction of new multiple-family buildings offset the decline in single-home starts, according to Canada Mortgage and Housing Corporation. Rising commodity prices also boosted the CAD as oil prices rose by 2.4%.

Canada has no economic reports due in the next 24 hours, which means that the USDCAD could carry on from yesterday's price action. The US economic calendar is free from high-impact reports as well.

[PipDiddy]

The CAD moved sideways for the most part of yesterday before making a late push to close higher than the USD. The USDCAD pair fell to a low of 1.0488 but closed at 1.0500.

There was no notable economic event in Canada and in the US yesterday. The markets were mixed and so was the USDCAD. As mentioned, the pair was virtually range bound before closing lower at 1.0488.

Both Canada and the US will have a bank holiday today. Therefore, trading of the Loonie will most likely be light and range bound again.

[PipDiddy]

Canada’s bare economic calendar wasn’t able to keep USD/CAD bears at bay yesterday as the pair managed to edge lower. It opened Asia with its head a few pips above 1.0500 and fell as the European trading session rolled along, eventually closing the day at 1.0460.

On the economic cupboard today is Canada’s New Housing Price Index (NHPI) at 1:30 pm GMT. The consensus is a 0.2% rise in price in September, up from the 0.1% increase seen in August. Traders use it as an indicator of future housing activity. Higher prices tend to draw businessmen into investing in Canada’s housing industry. However, the previous NHPI releases had little effect on price action so don’t expect this report to be any different.

Risk sentiment would most likely be the key factor in today’s trading session again, especially since Aussie, a commodity-based currency just like the Loonie, rallied on better-than-expected employment data. If this kind of sentiment persists throughout the day, the Loonie could find itself one notch closer to parity.

[PipDiddy]

The CAD loosened its grip on the USD yesterday, allowing the USD to recover after all its losses this past week. Loonie trading retraced a bit to close at 1.0561. The question is, will this continue today? Or will CAD buyers see this as an opportunity to jump back in?

It seemed that dollar buying was the theme for yesterday, as the CAD couldn’t benefit from an upside surprise from the New Housing Price Index. The index printed that housing prices rose by 0.5%, more than the expected 0.2% increase. It marked the largest uptick in home prices in 20 months. It seems that those low interest rate are working out…

We’ve got some trade balance data on deck later tonight at 1:30 pm GMT. Forecasts are that the deficit shrunk to 1.6 billion CAD, down from September’s figure of 2.0 billion CAD. If this does come in line with expectations, this could boost sentiment towards the CAD. It would highlight that exports are picking up. Given that the US is Canada’s major trading partner, it could signal that demand is rising in the US...