Daily Economic Commentary: Canada

Trading Discussion News and Economy
264

The Loonie bulls continued their rampage against the dollar yesterday after the traders took Canada’s economic data in stride. USDCAD ended the day 80 pips lower than its open price at 1.0465 after soaring to an intraday high of 1.0606.

Canada’s IVEY PMI did little to calm the raging bulls when it printed 58.9 against the 64.1 expectation. You would think that the traders would be wary of the figures, but apparently the drop was already half-expected since last month’s 62.7 figure was the highest since July 2008.

The monthly new house price index today could tell us more about Canada’s economy when it is released at 12:30 am GMT. The price for new houses is expected to rise by 0.3%, but a better figure might signal healthy housing demand.

Also keep in tabs with the crude oil inventories report out from the US at 3:00 pm GMT. News on oil supply might affect the Loonie’s value since the Canadian economy is highly oil-related.

265

Nom nom nom! The Loonie was looking pretty tasty to investors as risk appetite seized the markets yesterday. USDCAD plunged from its opening price of 1.0479 to an intraday low of 1.0380.

Investors went on a risk-taking spree after the IMF decided to upgrade their global growth forecasts. Maybe economies are finally going to pick up this year! In any case, investors took this as their cue to start buying growth-related currencies like the Loonie.

In other news, the May HPI data showed a 0.3% uptick in house prices, which is the same rate of increase as April. Since this was widely expected, it didn’t cause any sustained big movements upon its release.

Coming out at 11:00 am GMT today is the much-awaited June employment data. Most anticipate the unemployment rate to stay at 8.1%. However, analysts believe we’ll see a slight decline in the net change of employment, from 24,700 to 20,000. Since job creation leads to consumer spending and economic growth, these figures could spark a bull run if they come in better than expected. My buddy Forex Gump just wrote about Canadian employment in his blog. Make sure you check it out for more insight.

Ending our week is the housing starts report due at 12:15 pm GMT. Housing constructions that began in May were at 189,100, but analysts think that this number picked up to 190,300 in June. Higher figures are usually bullish for the Loonie since more construction often leads to more jobs and business activity.

266

It’s a bird… It’s a plane… It’s the Loonie! The Canadian dollar flew higher than Superman on Friday as USDCAD took off from Thursday’s close at 1.0439. It gained momentum during the New York session and peaked at 1.0296 before landing at 1.0336 with a 103-pip gain to end the day.

The Loonie soared like an eagle through the charts after Statistics Canada announced that 93,200 Canadians found jobs in June. Awesome right?? Wait, it’s even more awesome than you think because the actual statistics beat the consensus which only eyed 20,000 additional jobs for the month. Now that’s a good burn to ‘em analysts who undermined the health of Canada’s labor market! The stunning employment figures translated to a decrease in the unemployment rateto 7.9% in June from May’s 8.1%.

I guess the statistics on labor appeared like a mouth-watering slab of meat to the bulls because they didn’t seem bothered with the decrease in housing starts. According to Statistics Canada, the number of new houses that began construction in June fell to 189,300, disappointing the market’s expectation by 1,000 units and posting a decline of 6,000 units from May’s reading. Whew! I thought that would have signaled hunting season for the Loonie.

With nothing on tap from Canada today, will we still see the Loonie soar? I guess we’ll just have to wait and see. But if you’re planning to enter in some Loonie trades today, you may want to use crude oil prices to gauge which direction the currency is headed as they usually move through the charts together.

267

Is the Loonie’s flight descending, or just pausing for a breather? Despite positive economic reports, the Canadian dollar trimmed its gains against its major counterparts yesterday. USDCAD rose 47 pips from its open price of 1.0372, while EURCAD closed at 1.3064 after an intraday low of 1.2965.

Oil prices might have contributed to the decline when it dipped below the psychological $75 per barrel mark before it closed 0.37% higher yesterday. This affected the Loonie’s demand since a large chunk of the Canadian economy is comes from oil exports.

Good thing the BOC business outlook survey released yesterday showed that companies are expecting a rise in sales, payrolls, and investments. This was good news for their economic recovery, and added to the inflationary pressures. This could give the BOC more reason to hike interest rates next week.

Today the merchandise trade balance report is due at 12:30 pm GMT. The report may not include the intangibles like services, but it is still very closely watched since the oil, gold, and manufacturing sectors make up a large part of the country’s GDP.

The figure is expected to narrow down by 0.2 billion CAD after the IVEY PMI reflected slower purchasing activity. Look out though for a better than expected result, as would signal healthy export demand despite the threat of the global debt crisis. Could this report tip the scale in favor of another interest rate hike?

268

Thanks to risk appetite, the Loonie took flight! (Hey, that rhymes!) The bout of risk-taking pushed the USDCAD down from its opening price of 1.0376 to an intraday low of 1.0277, before finally settling at 1.0338.

Comdolls were perhaps the biggest gainers during yesterday’s trading sessions as equities and commodities soared in light of the successful Greek debt auction. A 2.94% rise in oil prices gave the Loonie plenty of fuel to launch into the skies yesterday. Oil is one of Canada’s biggest exports, so its economy and currency usually benefit from rising oil prices.

The risk rally was even able to overcome the fact that Canada’s trade balance figure came in worse than expected. Analysts had expected the balance to level off, with exports equaling imports. However, the month of May gave a downside surprise and recorded a deficit of 500 million CAD, which is 200 million CAD wider than the previous month.

On the upside, the report showed that both exports and imports were healthy, with imports outgrowing exports 5.7% versus 4.2%. Basically, this means that the wider trade balance is a result of stronger domestic demand. Not so bad after all, eh?

No high-impact reports on deck for today. In the meantime, look to the US, which is due to release its retail sales report and FOMC meeting minutes, to give the USDCAD direction for today.

269

USDCAD started the day strong at 1.0337 but it seemed like the grizzlies went on a recess and the Care Bears took over. The pair was unable to trade past the 1.0300 handle and advance any further from the day’s low of 1.0287. It closed at 1.0343 with only a 6-pip win for the Loonie.

The lack of reports from Canada yesterday could probably explain why the Loonie-grizzlies didn’t pounce on USDCAD despite the disappointing US data. Hmm, I wonder if today’s economic reports will be enough for them to drive the pair down the charts.

Statistics Canada will do the honors of presenting the data to the public at 8:30 pm GMT. Manufacturing sales is anticipated to have increased to 0.4% in May from April’s 0.2%. Also, motor vehicle sales is expected to show an improvement to -0.1% in May from April’s -4.7%. If the actual numbers come out better than expected we may just see USDCAD tumble down the charts.

270

Yesterday the CAD bulls failed to show enough strength against the pessimism in the US, even when Canada posted positive economic data. The Loonie lost 56 pips to the dollar at 1.0383, and a whopping 285 pips against the euro at 1.3444.

The monthly manufacturing sales surprised analysts’ estimates of 0.3% growth when the May figure maintained April’s 0.4% expansion.

The upside surprise in the monthly motor vehicle sales also suggested that consumer spending might be picking up in Canada. The report showed an increase of 0.2% in May after dropping by 4.7% last April.

Still, the Loonie took a hit, as the dollar took a beating yesterday. Remember, the US is Canada’s biggest trade partner. If the US shows more signs of weakness, it could spell doom for the Canadian economy as well.

Will the Loonie have the chance to fly to the skies once again? Only the leading index at 12:30 pm GMT is scheduled for today. Analysts are expecting a 0.7% increase from June’s 0.9% growth, but a better than expected figure just might put enough inflationary pressure for another interest rate hike, and provide a boost for the Loonie.

271

The Loonie lost major pips last Friday. Unfortunately, unlike in the TV show, it didn’t get a prize for being one of the biggest losers! To end the week, USDCAD soared from its opening price of 1.0389 and rested at 1.0547 for the weekend.

With risk aversion in full swing, investors didn’t seem to pay much attention to the awesome June leading index figure. A reading of 0.7% was expected, but instead, the actual results gave everyone a pleasant surprise by posting a reading of 1.0%. Things were looking so good in Canada that experts decided to revise the previous month’s reading up to 1.1% from 0.9%!

Sadly, the report’s good vibes weren’t enough to keep the Loonie bulls happy. A 1.06% drop in oil prices had the currency slipping 1.9% against the USD.

Maybe this week will have better news for the Loonie.

Tuesday is a big day, as the Bank of Canada (BOC) is scheduled to announce its interest rate decision. Expect a lot of volatility at around 1:00 pm GMT, since many are expecting the central bank to raise rates from 0.50% to 0.75%.

On Thursday, the May retail sales report is due to show a slight improvement at 12:30 pm GMT. April showed a disappointing 2.0% decline in retail trade, but analysts are expecting a turnaround in the latest edition of the report. If actual results can manage to exceed the forecast of a 0.5% increase, the Loonie may just find itself back in the skies again.

Hours after that, the BoC will hold a press conference to discuss the central bank’s monetary policy report. Make sure your eyes and ears are glued to the screen at 2:30 pm GMT because you could pick up on some valuable insight on where the BoC sees the economy in the coming months.

Ending our week at 11:00 am GMT on Friday is the June CPI report, which is anticipated to show a 0.2% decrease in prices following a 0.3% increase in May. Low figures indicate soft inflationary pressures and give the BoC less reason to hike rates in the future, so look for the Loonie to weaken if results come in lower than expected.

272

USDCAD opened the week at 1.0565 and went off to rally to the day’s high at 1.0582. It then went in favor of the Loonie, filling up the 20-pip opening gap and hit the day’s low at the 1.0500 handle. That was when the Loonie started singing, “pips like sugar, pips like sugar, this currency got you sprung, this currency got you –, ”then it was cut short as the bears took away its gains and just finished the day at 1.0555.

The lack of billboard-topping economic reports from Canada may have kept the Loonie from capitalizing on its pips. However, today is a new day and things could be different! Why? Drumroll please!

At 1:00 pm GMT, the Bank of Canada will announce its interest rate decision. Most currency traders are betting on a 25-basis point increase to 0.75%, primarily because the Canadian economy has been printing pretty stellar numbers.

Like what? Well, 93,200 people found jobs in June and the unemployment rate down to 7.9% from May’s 8.1% reading. Also, retail sales were up 4.60% in the second quarter of 2010 and imports were 5.7% higher in May suggesting strong domestic demand. The most recent CPI report also point to increased inflationary pressures in the country.

Aah, aah, aah! Wait! Before you enter in those long Loonie trades, the BoC’s cautious tone may make them Loonie bulls turn into bears even if it does raise its rates. Remember this was what happened in June. So keep an ear out for that and be careful!

273

“We did it!” The BOC pulled off a Dora the Explorer yesterday after they increased their interest rate by 25 basis points to 0.75%. This caused the Loonie to soar 98 pips against the dollar, 128 pips to the yen, and 179 pips to the euro. Now that’s excelente!

Unlike Dora, however, the BOC didn’t say “yay!” after announcing their decision. The bank cited that they expect the weakening consumer spending and business investment to weigh on the economy’s growth over the next few weeks.

In fact, they even lowered their 2010 growth forecasts from 3.7% to 3.5%, and 2011 is now expected to expand 2.9% from the previous 3.1% estimate.

Will the wholesale sales report at 12:30 GMT confirm the BOC’s grim forecasts? The data is expected to increase by 0.4% after April’s 0.3% decline, but a worse than expected figure just might confirm the worries on Canada’s economic growth.

274

Just like its national sweetener, the CAD was as sweet as maple syrup… To the bears! Yesterday, USDCAD went on a sugar rush and dashed from an intraday low of 1.0352 only to crash at 1.0478 at the end of the day.

The CAD found itself on the losing team yesterday, as risk aversion wiped out the comdolls.

Adding a bitter taste to the CAD bulls’ mouths was the wholesale sales figure which came in disastrously, posting a 0.1% decline in May. Analysts were quite optimistic with their forecasts for the May figure, anticipating a 0.4% upturn following the 0.2% decrease in sales at the wholesale level in April. In spite of healthy labor market conditions, it seems like consumer spending is still weak. Uh oh!

Could this report be a preview of the retail sales data coming out later at 12:30 pm GMT? Analysts are expecting a turnaround from the 2.0% decrease in retail sales seen in April, by predicting a 0.4% increase in May. For the sake of CAD bulls, let’s hope they get it right this time!

Then at 2:30 pm GMT, investors will finally catch a glimpse of the BoC’s monetary policy report. Just minutes after that at 3:15 pm GMT, the BoC Governor will hold a press conference to discuss the said report. Hopefully, you’ll be able to get an idea of where the BoC sees the Canadian economy going in the coming months. More importantly, they might just reveal how they plan to act in the near future. Stay sharp, folks! An optimistic outlook and hawkish statements might just give you the CAD rally you’ve been waiting for.

275

Did you see the Loonie drive a Gallardo Pipborghini down the charts yesterday?! USDCAD traded lower after opening at 1.0478 as the 1.0500 handle proved to be a stronger resistance than the bulls imagined. The pair closed yesterday at 1.0393 with an 89-pip win for the Loonie.

The decline in consumer spending in May wasn’t enough so stop the Loonie from cruising up the charts. According to Statistics Canada, retail sales fell 0.2% during the month which disappointed the market’s expectation of a 0.4% growth. But what fueled its rally?

Two things: risk appetite and the BoC monthly report.

The monetary policy report wasn’t exactly spankin’ with optimism but it implied that the BoC was more open to rate hikes than it was back June. BoC Governor Mark Carneycited the country’s growth being near pre-recession levels and that proved to be enough nitro to boost the Loonie. According to him, the bank expects the economy to expand at an annual rate of 3% for the second quarter with cheaper commodity prices and Loonie weakness to help exports.

The pessimism came when the BoC downgraded its GDP expectation for 2010 to 3.5% from April’s 3.7% forecast. It was still all good for the Loonie though as Carney cited the slowdown in global economic recovery being the reason for the revision and not so much about Canada’s domestic economy.

In addition, they also expect inflation to be close to the 2% target. See if today’s CPI report for June agrees with the BoC’s forecast. It is expected to have declined 0.2% in June from the 0.3% increase it posted in May. Core CPI, which excludes volatile items, is also seen to have decreased from 0.3% in May to 0.1% in June. If the actual figures come out better than expected at 11:00am GMT, we may just see the Loonie speedin’ up the pip lane.

276

The Loonie hitched a ride on the risk appetite train last Friday after the better-than-expected economic reports from euro zone boosted the demand for the comdollars. USDCAD ended the week 32 pips higher than its open price at 1.0361 after an intraday high of 1.0437.

Canada’s economic data might have limited the Loonie’s gains after the CPI for June showed a 0.1% drop from May’s 0.3% growth. The report was a reflection of the retailers’ price cuts to stimulate consumer demand. Hmm, maybe the downbeat remarks of the Bank of Canada (BOC) in their last interest rate hike have merit after all.

Canada will take a break from economic reports until Thursday when the price indices of raw materials and producer prices are released at 12:30 pm GMT. The raw materials are expected to increase by 1.1% this June after the 7.2% drop in May, while the producer prices are estimated to show a 0.6% improvement from May’s 0.3% increase.

Meanwhile, the big monthly GDP report will be released at 12:30 pm GMT on Friday. The economy is expected to have grown by 0.1% in May after the no growth scenario in April.

Keep close tabs on these reports, my friends! Lower-than-expected figures just might support the CPI data which suggested that demand from the Canadian economy is weakening. Uh-oh. Will the BOC finally have an excuse to stop their interest rate hikes?

277

With no economic reports from Canada to drive it around, the Loonie hitched a ride with risk appetite to make its way up to WinVille! Yesterday’s price action saw the Loonie rise against the USD for the third day in a row as USDCAD dropped from its opening price of 1.0372 to close at 1.0323 at the end of the day.

It joined the ranks of the AUD and NZD in celebration of the comdolls’ victory over the USD. Yea boi! Thanks to steady oil prices and better-than-expected US data that boosted confidence worldwide, the Loonie rediscovered the ability to fly.

It looks like you’ll have to wait another day to get your first taste of a Canadian report for the week. In the meantime, set your eyes south of the border, where the US is scheduled to release their June core durable goods data. If the results of this report come in positive, risk appetite might hit the bellies of investors and drive the Loonie up again! Catch it at 12:30 pm GMT!

278

“No no Loonie, no no-ooh.” Too bad the Loonie didn’t have the same charisma on investors in yesterday’s trade as the Canadian pop sensation, Justin Bieber, has on the ladies.

USDCAD traded in favor of the Loonie before the New York session started, reaching the intraday low of 1.0256. But it sharply reversed from its tracks and peaked at 1.0396 before it closed the day at 1.0357.

  With the absence of economic reports from Canada, it seems like the currency is left to the mercy of the market’s hard-to-predict-eenie-meenie-miney-moe sentiment. The Loonie’s early rally yesterday might have been courtesy of the better-than-expected European data. But the positive US figures probably caused it to lost its gains. 

  Tsk, tsk. Sorry Loonie bulls, but it seems like this trend is going to continue until we see Canada’s [GDP](http://www.babypips.com/forexpedia/GDP) figures for the second quarter on Friday. Good luck on your trades!
279

Is it time to land on the ground? After experiencing interest rate highs last week, it seems that risk aversion started weighing on the Loonie. USDCAD ascended 42 pips from its open price at 1.0384, while EURCAD ended the day at 84.13 after opening at 84.22.

The lack of economic data from Canada early this week exposed the Loonie to risk sentiment, so the disappointing orders data from the US yesterday didn’t do much for the Canadian dollar.

Of course, it also didn’t help that Canada posted weaker-than-expected retail sales and CPI figures right after Bank of Canadahiked interest rates to 0.75% last Tuesday.

Will the Loonie can gain back some of its strength today? The prices of producers and raw materials are scheduled today at 12:30 pm GMT.

Prices for raw materials are estimated to rise by 1.1% this June against May’s 7.2% decline, but producer prices are expected to sustain its 0.3% growth. Weaker-than-expected figures for both reports might support the BOC’s statements that economic growth remains weak despite the increase in interest rates.

280

The Loonie pip-trotted on the bulls’ turf last Friday despite weaker-than-expected GDP figures for the second quarter. USDCAD grooved to an intraday high of 1.0376 before the Loonie stepped-up and led the pair to the week’s close at 1.0282.

Fortunately for the Loonie, price action was dancing to the tune of risk appetite last Friday. Canadian economic growth fell short of the market’s 0.2% expectation when it only printed at 0.1%. According to the report by Statistics Canada, the weakness in the service sector weighed down the hustle that the export sector showcased during the month.

Yikes! I guess the Loonie got a lucky that US GDP also disappointed expectations and grabbed the spotlight. Investors probably figured that Canada’s economy is groovin’ better than that of the US.

Our economic calendar is blank for the Loonie today so be on your toes for news reports that could offset the market’s appetite for risk. Good luck on your trades!

281

Choo choo! All aboard the Loonie train! USDCAD traded lower yesterday after reaching an intraday high of 1.0302 at the start of the Asian session. It hustled all the way down to its six-week low at 1.0204, before closing the day with a 51-pip gain for the Loonie. Whoot whoot!

Without any Canadian report on tap until Friday, I guess the Loonie will have to rely on the market’s risk sentiment in snatching pips from its counterparts as it did yesterday. Luckily, it was risk appetite guiding price action and not risk aversion!

The hustle in the commodity market yesterday may have also helped the Loonie impress the bulls. Crude oil, Canada’s largest export, sold at $80 per barrel which boosted the currency’s rally. The Loonie tends to follow the direction of crude oil prices as it is Canada is a major exporter of the commodity.

So keep tabs on crude oil as it will help you gauge which direction the Loonie will trade today. Good luck!

283

BORRRINGGG!!! With no major catalyst to spark any moves, USDCAD stuck within a tight range of just 18 pips! The pair finished exactly at it’s opening price of 1.0238.

Once again, no data will be released from Canada today. But that doesn’t mean that we’ll be in for a snoozer. Watch out for news coming out from the US, as the ADP employment and ISM services PMI reports are both scheduled for release. Both of these are high impact reports, so be on your toes when trading the US session tonight!

284

Unchartered territory! Okay fine, not really unchartered, but it’s been awhile since USDCAD dipped below the 1.0200 mark. The Canadian dollar hit a 6 week high, as USDCAD fell over 60 pips to close at 1.0177. Another step back towards parity perhaps?

Despite the strength of the dollar versus the euro and pound, com-dolls like the Loonie lorded it over the currency markets yesterday. It seems that risk appetite is strong and that commodities are doing well. Things could get hectic today though, as we’ve got interest rate decisions from both the BOE and ECB. Who knows what effect these two events could have on risk sentiment!

On the Canadian front, building permits data will be released at 12:30 pm GMT. Building permits are projected to have increased by 1.2% in June. After last month’s crazy fall of 10.8%, any figure indicating growth would certainly be good news.