Daily Economic Commentary: Canada

Daily Economic Round Up of data from Canada!

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%.

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.

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 Employmentfigures?). 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.

The USD/CAD traded above 1.1600 after the weaker-than-expected NFPreport 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.

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! � votre sant�!

Expect another �light� CAD throughout the day.

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.

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?

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.

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.

The CAD remained steady last week even as risk tolerance continues to subside. Still, positive economic data provided a lot of support for the currency, as CAD buyers refused to give up the 1.1700 handle versus the USD! They bought the CAD every single time it attempted to breach the 1.1700 level.

We saw this last Friday when Statistics Canada reported that only 7,400 jobs were lost in June compared to the 34,600 forecast. This bumped up Canada�s unemployment rate to only 8.6% and not 8.7% like initially expected. Statistics Canada also reported that the selling price of new homes decreased slightly by 0.1%. Although in the negative, this is an improvement from the 0.4% drop predicted. Still, the underlying fundamentals of the country remain particularly weak and economists are saying that
Canada�s economy wouldn�t pick up until US�s economy is back in full swing.

We�ll see the Bank of Canada�s quarterly survey on business outlook today at 2:30 pm GMT. Economists and investors alike tend to give importance to this report because it provides an inside look into the minds of businesses. The thing is, businesses usually are the first to adapt to changing market conditions and their actions could provide a good leading indicator for future economic activity.

The USDCAD broke key support yesterday, as the CAD was boosted by good news from the BOC Business Outlook Survey. The pair closed at 1.1517, reflecting the strongest showing by the Loonie since the start of the month.

The BOC released its Business Outlook Survey yesterday, and indicated that Canadian businesses are now optimistic about future sales. The survey said that 61% of businessmen sales growth would rise over the next year, while only 23% expect sales to decline. In another survey, those surveyed said that it is easier to obtain loans now as compared to when the last time the questionnaire came out in April. Could this good news set the tone for the rest of the week for CAD trading? Lets see!

Not much high impact economic reports coming out from Canada over the next couple of days. The only data coming out are new automobile sales and manufacturing sales, due at 12:30 pm GMT today and tomorrow respectively.

Behold the mighty CAD! One of the most powerful moves in the currency market yesterday was that of the USD/CAD, which drilled through several support levels. With the lack of major economic reports and with oil lingering below $60 per barrel, where oh where did the CAD draw its strength?

Analysts concluded that the rise in Canadian bond yields and the speculation that oil prices have already bottomed are they key drivers in the CAD rally. The USD/CAD’s downtrend gained further momentum as the US reported stronger retail sales and PPI figures. The surge in risk tolerance pushed the pair below the 1.1400 handle.

As the USD/CAD tiptoes towards the 1.1300 mark, manufacturing sales data could cause a retreat. This report, which is due at 12:30pm GMT today, is expecting a 0.8% month-on-month decline. The pair still has a shot at resuming its downtrend if stronger-than-expected economic data from the US cause another run of risk appetite.

The CAD bullied its way against most the other big boys in the park in yesterday�s trading. The only �kid� that held its ground was the NZD.

Canada�s manufacturing sales in May came in terrible as it slipped by 6.0%, way past the initial estimates for only a 0.8% decline. Automobile production dropped by 25% in May. Car and truck part sales also slid by 22%. However, the CAD rose following the report given the rise in stocks and crude, which is Canada�s major export. Yet, the CAD�s appreciation is seen negatively as this makes Canadian exports relatively more expensive. This then would undermine the country�s recovery.

No economic reports are scheduled in Canada today. The CAD�s movement may be driven therefore by the investors� sentiment in the US market.

Phew. It seems like investors finally had their fill of risk yesterday as CAD bulls took a break (and profits, if I may add) from their rally run a few days before. Canada�s empty economic calendar was also able to keep technical levels in check and intact.

Statistics Canada�s consumer price index is scheduled for release today at 11 am GMT. Economists predicted that the core CPI, which excludes volatile items such as oil and automobile prices, would remain flat for June compared to May. The forecast for the headline CPI, on the other hand, is a 0.3% increase in prices.

Following at 12:30 pm GMT is Canada�s leading index. The leading index is basically a combined reading of ten leading indicators designed to determine the direction of the economy over the next few months. These indicators are associated with the following: labor, production, new orders, consumer sentiment, housing, stock market prices, money supply and interest rates. Most of the indicators used have been previously released though so the survey’s effect on the market tends to be muted. In any case, the consensus is that it would print 0.2%, an improvement from May�s -0.1%.

It appears that some traders decided to go on a weekend vacation, taking profits before leaving the markets. We saw some more consolidation to end the week for CAD trading, as the USDCAD pair remained within its daily range for two consecutive days after the strong rally by non-USD currencies last week. The USDCAD closed slightly lower at 1.1161. Is this just a brief pause before the rally continues? Or have we seen a short-term bottom?

A report showed that consumer prices posted its first annual decline in 15 years last month, as cheaper gasoline prices continue to have an effect on consumer prices all over the world. The CPI report showed that from June last year, prices have fallen by 0.3%, despite increasing by 0.3% from May to June. However, the BOC isnt too concerned with the decline, because excluding gasoline, prices rose by 2.1% last month.

Also released last Friday was Canada�s Leading Index, which fell by 0.1%. This came as a surprise as it was expected that the index would rise by 0.2%. The decline in the index was attributed to slow manufacturing and retails sales which offset good figures from the housing and stock markets. This indicates that things are still unstable and that we may continue to see good news in certain sectors, while seeing some bad news in others.

Today, at 12:30 pm GMT, the Foreign Securities Purchases - a report that measures how many Canadian bonds, stocks and money market assets were purchased by foreigners - and Wholesale Sales m/m reports are due.

Tomorrow, we could see more volatility as the BOC will be releasing its interest rate decision along with the accompanying rate statement. With the rate already at a very low 0.25%, it is not expected that the BOC will cut rates. However, the BOC has mentioned in the past that they have the capacity and willingness to implement quantitative easing measures if they did not see the Canadian economy improving. Be on the lookout for any statements that could express negative sentiment upon the current state of the economy.

The USD/CAD slid below the 1.1500 mark as the CAD continued with its seventh day in consecutive gains. With the pair inching towards the psychologically significant 1.1000 level, will the BOC’s rate statement provide more fuel to the CAD rally?

Canada’s housing and manufacturing markets have shown signs of improvement in the past month, thus reducing the likelihood of a rate cut. Inflationary pressures remain soft while rising unemployment has dampened consumer spending. Could this mean that the BOC is considering further stimulus plans? We’ll just have to wait and see until Thursday’s release of the BOC’s monetary policy statement.

Another risk factor in play for today is US Fed Chairman Ben Bernanke’s much-awaited speech at 2:00 pm GMT. Risk aversion may come back to haunt the currency market if Bernanke makes pessimistic comments regarding the state of the global economy. Is it time for the CAD to return its gains?

The CAD ended the day mixed against the USD as it hit a roadblock during the second half of the US trading session. The CAD was pretty much idle during the Asian and the Euro sessions. Volatility only started to kick in when the opening bell in New York was rung.

The Bank of Canada kept its target interest rate at 0.25% yesterday. The bank noted that the rising CAD has been putting a drag on Canada�s recovery. Risk appetite in the global capitals markets has been giving support on the CAD. One would think that such would be positive for Canada but this is not the case since a stronger CAD makes the country�s exports less attractive. In any case, the country is now on a better position compared to before. In fact, the bank raised its growth forecast to -2.3% from the initial estimate of a 3% contraction. The bank also said that it will keep its interest rate at the present level until the second quarter of 2010.

Canada�s retail sales in May will be released today at 12:30 pm GMT. The headline figure is expected to increase by 0.5% after declining by 0.8% in April. Any rise in the figure would reflect positively on Canada�s economy. Such would also be bullish for the CAD.

CAD is really putting on the pressure on the market! Yesterday, for the third straight time, it hit another monthly high versus the USD. The USDCAD pair closed the US session at 1.0986 from its Asian open at 1.1071.

It seems that the report on Canadian retail sales was the prime suspect for the steep climb up of the CAD. According to Statistics Canada, retail sales for the month of May shot up by 1.2%, much better than the 0.5% rise expected. April�s figure was also revised up to -0.6% from -0.8%. The core report, which excludes automobile sales, grew 0.7%, higher than the 0.4% increase consensus. Economists believe that consumers are starting to return to their old buying habits and returning in full force in the market after a long period of down time.

Today we�ve got the Bank of Canada�s monetary policy report at 2:30 pm GMT. It�s basically a report that outlines the bank�s view on the Canada�s economic health and inflation condition. Since these are the primary factors in setting the country�s benchmark interest rates, traders tend to value the report. The monetary policy report will be followed by a press conference at 3:15 pm GMT for a question and answer portion for the press. The prediction is that the bank will communicate to the public that the recession is starting to ease its grip on the economy. Still, be careful. We never know how the market will react to big events like this so expect increased volatility during this time.

And that Loonie continues to rise! The USDCAD pair broke through key technical support at 1.0900 and is approaching the yearly low at just below 1.0800. The loonie was buoyed by statements made by the BOC yesterday, who said that the recession was ending for Canada.

The BOC took a more positive outlook on the economy, as they feel that the recession is coming to a close as commodities prices continue to rise and consumer confidence is improving. The BOC said that they expect the Canadian economy to bounce back twice as strongly as the United States� � quite a statement to make! The bank predicts that output will increase by 1.3% in the third quarter, after initial forecasts were for a 1% decline.

On the topic of monetary policy, BOC Governor Mark Carney said that they will be keeping the current rate at 0.25%, as long as they see no threat of a sudden surge of inflation. Also, there are currently no plans to implement quantitative easing measures as it seems that the financial risks that sparked the recession are easing. Clearly, even though the BOC has a more positive stance, they are still cautious over the recovery.

Given the positive outlook of the BOC, will we see the CAD continue to make more headway? Or will we seethe BOC, who have stated that the strong appreciation of the CAD is slowing down recovery, make threats to try and weaken the currency?