Daily Economic Commentary: Canada

Trading Discussion News and Economy
387

Traders kept the Loonie’s swagger looking good as USD/CAD ended the year below p-p-p-parity! After opening at 1.0000, the pair only managed to inch 8 pips up to its intraday high. It then tumbled to a low of .9926 before finally closing at .9977.

So what got the Loonie struttin’ its stuff?

Some economic gurus say that the string of positive data that we’ve recently seen from the U.S. boosted the comdoll. Remember that 70% of Canada’s exports go to the U.S. The Loonie being a high-yielding currency might have also helped convince traders to root for it.

Looking at our economic calendar, we see that we could be in for a lot of action from the currency this week with the Ivey PMI and the employment report for December on tap.

The market is anticipating the Ivey PMI to print lower at 52.7 compared to its previous reading of 57.5 on Thursday at 2:00 pm GMT. On the other hand, hopes are high for the employment report with the consensus hollering for a net gain of 20,300 jobs. The figure will be released on Friday at 12:00 pm GMT.

But before these top-tier reports, we’ll get dibs on inflationwith the industrial product and raw materials price indices for November due on Wednesday at 1:30 pm GMT. Analysts are estimating a 2.2% increase in the general price level of raw materials, and a 0.5% uptick in the price of goods sold by manufacturers.

So make sure you start the year right by not snoozing on these reports!

388

Black Crack is king! The Loonie steamrolled its major counterparts yesterday as oil prices continued to rise in markets. USD/CAD leveled off to a 10-pip loss after falling to an intraday low of .9989. Meanwhile, CAD/JPY rose by 53 pips to its 82.24 closing price.

If you’ve been reading the best forex school in the galaxy, then you’ll know that Canada is one of the top producers of oil in the world, exporting as much as 2 million barrels of oil a day to the United States. Not too shabby, eh?

It looks like the Loonie will be dancing to the tune of oil and other commodity prices for a second day today as no economic report is scheduled for release. Canadian markets were closed yesterday, so a lil’ more action is expected today. Keep close tabs on the Loonie’s price action!

389

The Loonie wasn’t having such a good day yesterday as it lost ground to the Greenback. The fall in commodity prices, combined with the strong U.S. data, pushed USD/CAD to retest the psychological 1.0000 handle. Well, it looks like it held… for now.

Canada didn’t release any economic reports yesterday, probably because it’s gearing up to unleash a load of inflation reports today. At 8:30 am GMT, the raw materials price index and the industrial product price index are due. Prices of raw materials are expected to post a 2.1% increase for November while industrial product prices are projected to be up by 0.4%, suggesting that inflation is rising at a healthy pace in Canada. Stronger than expected figures could allow the Loonie to recover from yesterday’s drop, so make sure you keep your eyes and ears peeled for those reports!

390

It looks like the Loonie won’t go down without a fight as it struggled to bounce back from its recent loss against the Greenback. Once again, the psychological 1.0000 handle acted as resistance for USD/CAD. The pair slid to a low of .9933 before closing at .9962.

Impressive inflation reports may have been the reason behind the Loonie’s rally yesterday. The raw materials price index came in much better than expected as it clocked in a 3.5% jump for November. On top of that, the figure for October was upwardly revised to show a 2.1% increase. Meanwhile, the industrial product price index showed a 0.5% uptick, which was a notch higher than the projected 0.4% rise. Phew! It looks like all is well with Canadian inflation, eh?

Heads up for the Ivey PMI which is due 10:00 am GMT today. This manufacturing index could show that industry conditions worsened in January, as the market expects it to decline from 57.5 to 53.3 during the month. But since the index is still projected to have remained above 50, it would indicate that the industry kept expanding in January but that the pace of expansion was slower.

If the index comes in worse than expected, it could force the Loonie to bow down to the Greenback again. Otherwise, it could provide a boost for the Loonie, allowing USD/CAD to sink further from parity.

391

Gah! The Loonie bears finally won the pip-tug-o-war yesterday when USD/CAD closed with a 6-pip win. The pair dropped to an intraday low of .9925 before it capped the day at .9969.

Aside from Canada’s IVEY PMI missing market expectations at 50.0 in December, falling oil prices also weighed on the Loonie’s price action. As one of the world’s largest producers of Black Crack, the Canadian economy is sensitive to commodity price action.

Will the employment figures reflect the weakness in production demand? Canada’s employment figures are due for release today at 12:00 pm GMT. The unemployment rate is expected to tick up to 7.7%, but the Canadian economy is also expected to have added 20,000 new workers.

Stick around for these reports, will ya?

392

Just like last weekend’s top box-office hit, the Loonie showed true grit against the Greenback last Friday. USD/CAD suffered a 50-pip loss on better-than-expected economic reports in Canada. Boo yeah!

Canada’s employment numbers caught the currency bulls’ attention, especially when the reports showed that 22,000 jobs were added in December. The increase was larger than November’s 15,200 rise, and better than the estimated 19,100. Meanwhile, the unemployment rate didn’t budge from its 7.6% figure even when analysts pegged for an increase in jobless rate.

Let’s see if Canada can keep up the good vibes this week when the building permits are released at 1:30 pm GMT. The report is expected to increase by 0.8% in November after a 6.5% drop in October. Then, the Bank of Canada business outlook survey will also be released today at 3:30 pm GMT.

We’ll also see the housing starts report on Tuesday, the new housing price index on Wednesday, and even the trade balance report on Thursday. Estimates on the reports are mixed, so don’t let me catch you snoozin’ on these releases!

393

Let’s call it a draw! The Loonie stood its ground and didn’t budge against the Greenback in spite of weak economic data. USD/CAD finished the day practically unmoved at .9932.

According to the latest building permits report, November recorded an unexpected 11.2% decline in the number of new building permits issued. Talk about a nosedive! The sharp drop caught investors off guard as most were hoping to see a 1.5% increase after October posted a 6.2% decrease.

On the plus side, the recent shutdown of the Trans-Alaska pipeline system has caused oil prices to skyrocket and has helped the Loonie keep its losses against the Greenback in check.

Hold on to your seats, fellas, because we’ve got more data coming our way later today!

At 1:15 pm GMT, Canada is scheduled to serve its December housing starts data. The number to watch here is 180,000, as this is what is forecasted to follow up November’s 188,100 figure. But as always, there’s a chance for an upside surprise, so stay on your toes! This could be the report that sends USD/CAD tumbling!

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Oops, it did it again! The release of the less-than-stellar housing starts report did nothing to curb the Loonie’s lucky streak. Despite the report declining from 198,000 in November to 172,000 in December, the Loonie gained on the Greenback yesterday when other currencies are botching against it. USD/CAD dropped by 34 pips to .9898 after it hit an intraday high of .9951.

It seemed that the Loonie was supported by rocketing oil prices, which jumped by 2% yesterday and even reached 91 USD per barrel. As one of the world’s largest producer of Black Crack, rising oil prices usually means more moolah for Canada’s economy. Boo yeah!

Let’s see if the Loonie can keep up its hot streak today when the new housing price index is released at 1:30 pm GMT. House prices rose by 0.1% in October, so a higher growth could give more support to the Loonie.

395

There’s no stopping this steamroller! The Loonie trampled all over the Greenback again yesterday on risk appetite in markets and better-than-expected economic reports from Canada. USD/CAD dropped to an intraday low of .9849 before it leveled off 28 pips lower than its open price at .9869.

Canada’s new housing price index rose by 0.3% in November, which was faster than October’s 0.1% growth. The positive report blended with the risk appetite in markets, especially since the euro zone’s Portugal also posted good news

Keep close your eyes glued to the tube today as Canada’s trade balance report will be released at 1:30 pm GMT. The country’s trade deficit is expected to worsen from 1.7 billion CAD in October to 2.0 billion CAD in November, but a lower reading could push USD/CAD lower in the pip-charts.

Good luck in your trading today, fellas!

396

As though they hand blinders on, CAD bears ignored yesterday’s positive trade figures and sold off the currency anyway! They didn’t stop until USD/CAD had reached .9892, up from .9869 at the beginning of the day.

Canada got quite a bit of good news yesterday when its trade balance report hit newsstands. Word on the street is that its trade deficit is on the verge of disappearing! From its 1.5 billion CAD figure in October, the deficit shrank to just 0.1 billion CAD in November, waaay better than the forecasted 2.0 billion CAD.

So then why didn’t the CAD rise? Well, the details of the report revealed that things are as good as they seem. Rather than a large increase in exports, the narrower trade deficit was brought about by a decrease in imports and a modest rise in exports. Darn!

Sadly, there are no more significant reports due from Canada today. But the U.S. is set to roll out CPI, retail sales, and consumer sentiment reports today. As you know, Canada’s economy is heavily influenced by the U.S. economy’s performance, so be sure to catch those releases!

397

What a woozy! USD/CAD’s price action last Friday looks like a reverse U: it rose very fast during the Asian session, but eventually gave up all of its gains once the U.S. trading session ended. The pair closed Friday at .9894, just two pips higher from its opening price that day.

Why did USD/CAD move like that? Well, I’m here to explain!

Earlier in the day, China raised the Reserve Requirement Ratio (RRR) of commercial banks for the first time this year. You could say raising the RRR is kinda like raising interest rates to mop up excess liquidity, but indirectly. China’s move did not sit well with traders, and gave them reason to speculate global economic growth could slow down. As a result, they sold-off higher yielding currencies in favor of the dollar.

Then, once the European afternoon trading session rolled along, economic data from the U.S. came in unexpectedly disappointing. Both the retail sales report and the University of Michigan consumer sentiment surveyfailed to meet expectations, which gave the Loonie a chance to regain its losses it experienced early on.

This week, we’ve got a few high-profile economic data on Canada’s economic calendar.

On Tuesday, at 2:00 pm GMT, the Bank of Canada (BOC) is scheduled to announce their decision on interest rates. It is widely expected that the bank will keep rates unchanged at 1.00%, so focus instead on the accompanying statement.

Then, on Friday, the retail sales report will be released. The forecast is a gain of 0.4%, half the 0.8% increase seen in the previous report. Rising retail sales is considered positive for the economy, so if the actual figure manages to beat expectations, then expect USD/CAD to drop.

That’s it for today! Good luck!

398

“Take that, Greenback!” yelled the Loonie as it pushed for another day in gains. USD/CAD opened at .9883 and was able to close lower at .9866 for the day. Will the Loonie be able to keep up its winning streak against the U.S. dollar?

Even though Canada posted a weaker than expected foreign securities purchases report, the Loonie still managed to edge higher against its counterparts. Purchases of Canadian securities amounted to only 8.01 billion CAD instead of the projected 10.42 billion CAD in November, suggesting that demand for the Canadian dollar declined during that month. Still, components of the data show that demand for Canadian bonds reached a record high, which is good news for the Loonie.

Expect more volatility for Loonie pairs today as the BOC gears up for its rate decision due 2:00 pm GMT. As Forex Gump mentioned before, the BOC isn’t likely to hike rates this time because of weak inflation and poor economic growth in their country. If Governor Mark Carney decides to focus on their economic shortcomings and issues a dovish statement, the Loonie might be forced to give up its recent winnings. On the other hand, if Carney tries to reassure the public that Canada will be able to bounce back soon, the Loonie could carry on with its rally.

399

The BOC’s decision to hold interest rates at 1.00% didn’t sit well with Loonie traders, who quickly sold off the currency in response. As a result, the Loonie was one of the weakest currencies yesterday, as shown by the 56-pip rally in USD/CAD that ended at .9929.

Even though almost everyone was expecting rates to remain unchanged, the BOC’s rate decision was still a downer. Maybe it was because investors were once again reminded of Canada’s dependence on U.S. growth.

Canada conducts a huge portion of its trade with the U.S., which is battling economic problems of its own. It wouldn’t be smart to raise rates with the outlook for the U.S. still in question, now would it? To make matters worse, now that the Loonie is trading above parity against the Greenback, Canada’s exports have been taking a hit.

Hopefully, we’ll get a better idea of how Canada’s economy is really performing when the BOC releases its monetary policy report and holds its press conference later today. Catch the report at 3:30 pm GMT and the press con at 4:15 pm GMT for a chance to hear a few insights and concerns straight from the horse’s mouth!

But if you’re not into wordy announcements and trading economic numbers is your thing, Canada’s got something for you, too! At 1:30 pm GMT, November’s manufacturing sales data is due for release. According to economic fortunetellers, manufacturing sales growth softened from 1.7% to 0.8%. You know what to do, Loonie bulls… Cross your fingers and hope the actual results exceed forecasts!

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How quickly the tides have turned! Just a few days ago, the Loonie was in full-on bull mode. Now, it’s got back-to-back losses under its belt! Disappointing manufacturing sales data and a cautious tone from the Bank of Canada sent the Loonie lower against the Greenback, pushing USD/CAD 27 pips higher to close at .9956.

Manufacturing sales data was a bane to the Loonie as it brought two doses of bad news. Not only was October’s 1.7% uptick downgraded to 1.5%, but November posted a 0.8% decline, which is the total opposite of the forecasted 0.3% rise. Yeeeouch!

In other news, I couldn’t help but notice that the BOC seemed a bit worried in its monetary policy report and press conference. They showed a lot of concern over the Loonie’s recent rise and its effects on the exportsindustry. And although the central bank raised its growth forecasts for 2011 and 2012, they’re expecting growth to temper in the first quarter of 2011.

I hope you’ve recovered from yesterday’s trading because Canada’s got more in store for you today.

At 1:30 pm GMT, we take a look at the leading index and wholesale sales data.

The leading index is supposed to tick higher from 0.3% to 0.4%, according to forecasts. Likewise, wholesale sales are expected to improve and grow by 0.3% in November, an improvement to October’s nonexistent growth. Maybe better-than-expected results in these reports can give the Loonie its groove back, eh?

401

The Loonie’s loss against the dollar in yesterday’s match-up was more of an eyesore than Fernando Verdasco’s outfit in the Australian Open. It was the underdog in the Asian and European sessions as USD/CAD rallied to an intraday high of 1.0031. Towards the end of the day, it gained the upperhand and was able to close at .9971.

However, the Loonie was 15 pips short of erasing its loss despite better-than-expected data. Boo!

It was reported yesterday that Canada’s wholesale sales for November was quadruple the market consensus when it came in at 1.2%. Making the report even better was that the figure reported for October was revised up from 0.0% to 0.3%, suggesting that retailers expect strong demand from consumers.

The leading index for December also should have given the Loonie bulls an encouraging pat on the back when it printed at 0.5%, 0.2% higher than what experts had predicted. Too bad fears of another interest rate hike from China and the U.S.’s own version of positive reports were too much for them to handle.

Perhaps the retail sales report for November which is due later at 1:30 pm GMT will give the Loonie enough boost in today’s trading. For that to happen, we’ll probably need to see a 0.5% uptick or higher. So keep tabs on that!

402

The Loonie was down… But it certainly isn’t out yet! After sliding the past few days, it staged a wonderful rally last Friday against the Greenback. With help from upbeat retail sales data, USD/CAD fell below parity once again and closed at .9956 after falling to an intraday low of .9909.

When news hit the streets that Canada’s retail sales grew 1.3% in November, instead of just 0.5% as predicted, Loonie bulls jumped for joy! This came as a pleasant surprise because the BOC wasn’t too optimistic about consumer spending because of Canada’s high levels of household debt.

The best thing about November’s strong sales is that it was mostly caused by a rise in sales volume and not just a rise in prices. This basically means that people are really out there buying MORE and that this higher sales figure isn’t just the effect of higher prices.

For the week ahead, tomorrow’s CPI report is the release to look out for. According to forecasts, CPI likely doubled from 0.1% to 0.2% in December. Let’s see if a stronger-than-expected inflation figure can spur the Loonie higher. Tune in at 12:00 pm GMT to see the results!

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Up, down, up, down! When will investors make up their minds about the Loonie? With no economic data to work with yesterday, it just bounced around, eventually ending lower against the USD as USD/CAD closed 10 pips higher for the day at .9945.

Maybe the Loonie will get a better sense of direction today when Canada rolls out last month’s CPI. Forecasts are for a repeat of November’s 0.1% rise in consumer prices, but don’t be all too surprised to get a higher figure than that.

If you recall, raw materials prices and industrial product prices posted substantial increases earlier this month, and these may just translate into higher consumer inflation. That being said, it might be a good idea to wait for and anticipate an upside surprise at 12:00 pm GMT. Good luck, kiddos!

404

No thanks to worse-than-expected inflation figures, the Loonie ended another day in the bear lair, losing 32 pips to the dollar. Boo! It only reached a high of .9912 before bears pounced on it and pushed USD/CAD above parity. At the day’s close, the pair had settled at .9977.

Yesterday’s CPI report showed that consumer prices were flat in the month of December and disappointed the 0.1% uptick that the market was anticipating. Meanwhile, the core version of the report, which excludes volatile items, came in 0.1% worse than at -0.3% forecast.

Remember that positive inflation usually increases the possibility of an interest rate hike which is consequently bullish for currencies. However, these not-so-hot CPI figures have investors thinking that the BOC won’t holler an increase anytime soon.

We have nothing on our economic calendar from Canada today. So make sure you get a feel of market sentiment and keep tabs on what’s on tap for the dollar to help you with your Loonie trades. Good luck!

405

Choppy, choppy, choppy! Despite ending the day slightly lower, USD/CAD traded in a very indecisive manner yesterday, bouncing around its session highs and lows. The pair closed the U.S. trading session at .9952, merely 26 pips lower from its Asian session opening price.

The absence of market moving economic data from Canada was probably the main reason behind USD/CAD’s ranging behavior. If it hadn’t been for the pessimistic FOMC statement from U.S., USD/CAD wouldn’t have moved at all!

With nothing on Canada’s data cupboard again, will today be another ho-hum day for the CAD? I don’t think so, since the U.S. has a bunch of important data scheduled for release. This means we could see USD/CAD bust out of its consolidation once the market-moving data start coming out! Keep an eye out for possible breaks of yesterday’s highs and lows!

406

With all eyes focused on the situation in Cairo, risk aversion took center stage last Friday, much to the dismay of the Loonie bulls. USD/CAD managed to rise above parity again, closing the day 80 pips higher at 1.0011.

Do note that the Middle East is one of the major exporters of oil, so traders are becoming more and more concerned that unrest in Egypt could negatively affect the supply of oil.

This week, we’ve got a couple of important economic data that you should keep an eye for.

The first one, Canada’s monthly GDP report, comes at 1:30 pm GMT later. It is expected that Canada expanded 0.2% in November, similar to the growth seen the month before. If the actual figure fails to meet forecast, we could see the Loonie extend its losses against the Greenback.

Then, on Friday, await Canada’s employment report at 12:00 pm GMT and the Ivey PMI at 3:00 GMT.

The forecast is that 18,900 net jobs were added in December while the unemployment rate remained at 7.6%. This means that the jobs being created is unable to keep up with the amount of people entering the workforce. Not a particularly optimistic sign, but when compared to other major economies, Canada is doing much better.

Meanwhile, the Ivey PMI is predicted to print a reading of 53.7 for January, slightly higher than the December’s 50.0 reading. Let’s see whether the positive expectations can help the Loonie pull out a win this week!