Daily Economic Commentary: Canada

Trading Discussion News and Economy
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Make way for the CAD bulls, they’re charging through!!! Ignoring Canada’s political issues, CAD bulls continued to press forward yesterday as rising commodity prices spurred them on. While the CAD saw modest gains against the USD with USD/CAD falling 19 pips to .9747, CAD/JPY rose 89 pips to close at 84.57.

With no economic data on the table, CAD traders had to feed off other market factors. Luckily, commodities gave them plenty to digest as oil prices rose again yesterday. Om nom nom!

Apparently, investors are starting to feel more pessimistic about the unrest in Libya, and they think it may be a while before the country can return to its former oil-exporting capabilities. Of course, oil prices received a lift with this potential threat to supply hanging over its head.

We’re back to our regular programming today as Canada sets out to unveil last month’s RMPI figure at 1:30 pm GMT. The index, which measures the change in price of raw materials bought by manufacturers, is a good indication of future consumer inflation because manufacturers often pass on rising costs to their customers.

Considering that BOC head Mark Carney expressed concern about inflation just this Monday, there’s a real possibility we’ll see a nice pickup from January’s 0.3% increase. As a matter of fact, forecasts say this figure is likely to double to 0.6%. With the markets already expecting a strong figure, we could see a sharp reaction in the event the actual results come in even better than expected.

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Strike three for the Greenback! Who could blame the Loonie bulls for boosting the comdoll for the third day in a row yesterday when better-than-expected reports from Canada supported the rally? USD/CAD only reached an intraday high of .9754 before it gave up and ended the day 33 pips down from open price at .9714.

Aside from strong comdoll appetite in markets, better-than-expected economic reports popped up to support the Loonie. Prices of raw materials in Canada rose by 1.8% in February when forex geeks were only expecting a 0.6% increase. Also, prices of products sold by manufacturers grew by 0.7%, which is faster than its 0.4% growth in January. Hmm, do I smell a BOC interest rate hike in the works?

Will Canada’s GDP report today at 12:30 pm GMT fuel the Loonie rally? The Canadian economy printed a 0.5% growth in December, but a higher figure for January might attract more interest rate hike junkies and push the Loonie higher in the charts.

Stay awesome, kids!

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The CAD is UNSTOPPABLE! Once again, it powered through its American counterpart, backed by another solid GDP report. USD/CAD continued to trade lower, forging a new two-week low and closing the day 20 pips lower at .9694.

The big surprise yesterday was that economic fortunetellers actually got their predictions right this time! Canadian GDP posted a 0.5% growth in January, matching forecasts for a repeat of December’s 0.5% expansion. This marks the fourth straight month of growth for Canada. Fourpeat, baby!

While growth in December was mainly driven by exports, January owes its thanks to stronger manufacturing. It was noted by market geeks that domestic demand (measured by consumer spending and business investment) was weaker in January, but luckily, manufacturing was able to pick up the slack.

That’s it for this week’s Canadian reports, but don’t you dare miss the U.S.’s NFP data at 12:30 pm GMT. It’s important to keep tabs on what’s happening south of the Canadian border since the U.S. is its largest importer. If data shows that the U.S. labor market is still struggling, it could result in weaker exports for Canada.

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Y’all better watch out for cavities ‘cause the Loonie has been lookin’ SWEEEEET lately! It gave another stellar performance on the charts last Friday as dovish words from the Fed and soaring oil prices gave the comdolls a solid lift against the USD. USD/CAD hit a fresh 40-month low after it closed 51 pips lower at .9645.

There are two main reasons why the Loonie went on a tear last Friday.

First, oil prices rose to a new two-year high. While it hurts our hearts and our wallets every time we see oil climb (darn gas prices!), the Loonie loves it when black crack gains. Oil is Canada’s top export after all, and so when oil is on the rise, it tends to benefit Canada’s economy and currency.

The second reason why the Loonie skyrocketed is because of some dovish words from the Fed. New York Federal Reserve President William Dudley basically countered the NFP’s better-than-expected results when he said that tightening expectations had gone overboard, giving the Loonie and its comdoll bros a big boost against the USD.

This week might be particularly good for trading the Loonie… We’ve got a busy one ahead of us! It’ll be interesting to see if the Loonie can gain ground at the same pace as the past two weeks.

We’ll start the week off with the BOC business outlook survey due today at 2:30 pm GMT. This is a critical report mainly because it’s released prior to the BOC’s interest rate decision. As such, it could give us vital clues as to how the BOC sees the economy and what it plans to do about monetary policy!

Towards the end of the week is when the action really picks up. On Wednesday, we have the Ivey PMI coming out (2:00 pm GMT), and forecasts have the index stumbling down from 69.3 to 65.2. Thursday then follows up with building permits data (12:30 pm GMT), which is expected to reveal a 2.1% increase after the previous month’s 5.1% drop. To cap our week off, we’ll take a look at Canada’s employment data, which is supposed to show a nice improvement in the labor market.

Now that we’ve got a nice overview of the week ahead of us, let’s get ready to rumble!!!

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Phew! It looks like the Loonie needed a breather from its recent rallies. After hitting a low of .9616, USD/CAD pulled up and closed at .9675. Is this merely a retracement or the start of a reversal?

BOC’s business outlook survey was optimistic as ever. The report showed that businessmen were upbeat with their economic prospects, particularly those driven by commodity-related activities. Firms expect a pickup in sales growth, which should be good for Canada’s overall economic performance.

Up ahead, Canada’s economic schedule is empty but that doesn’t mean we won’t see any strong moves by USD/CAD. The U.S. is set to release a couple of big reports today, namely the ISM non-manufacturing PMI and the FOMC meeting minutes, so make sure you stay on your toes!

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Take that, Greenback! The Loonie fought back against the U.S. dollar yesterday, pushing USD/CAD back down near its former lows. The pair opened at .9674, reached a low of .9627, before ending the day at .9638.

Canada didn’t release any red flags yesterday, leaving USD/CAD at the mercy of U.S. economic data. Fortunately for the Loonie, U.S. reports came in weaker than expected, with the ISM non-manufacturing PMI landing a few notches below the 59.8 consensus. Meanwhile, the FOMC minutes revealed that the committee members are still divided in their stance towards quantitative easing. This indecision was probably one of the reasons why the U.S. dollar weakened against the Loonie during the U.S. session.

Up ahead, Canada is set to release its Ivey PMI at 2:00 pm GMT. The report could show that manufacturing activity in Canada slowed down from 69.3 to 65.1 in March. A weak figure could force the Loonie to give up its recent gains while a stronger than expected figure could push it to rally further. Who knows? It could be enough to make USD/CAD break its latest low at .9616!

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Loonie bulls, why even bother?! Save for a pullback during the U.S. session, USD/CAD pretty much belonged to the bears yesterday. A strong Ivey PMI reading caused the pair to hit an intraday low of .9569, but it ultimately ended the day 36 pips lower at .9603.

You could say yesterday created the perfect environment for a Loonie rally. Risk appetite was healthy, and this caused oil prices to gain, which in turn, gave the Loonie a boost.

At the same time, economic data was well in the green. The Ivey PMI, one of Canada’s biggest reports, jumped from 69.3 to 73.2 to beat forecasts for a reading of 73.2. It seems Canada’s manufacturing industry is faring much better than most had expected.

The only problem is that the Loonie’s undying strength is starting to worry Canadian companies. Remember, Canada is an export-dependent economy, and it would like to keep its goods competitive, but it’s difficult to do this when your currency’s appreciation makes your goods more expensive in the global market.

This is probably one of the reasons why the BOC doesn’t want to raise rates despite rising inflationary pressures. A rate hike would only strengthen the Loonie further, and would hurt Canada’s exporters even more.

More data coming our way today! We’ve got building permits numbers due at 12:30 pm GMT. Economists say we should expect to see a 1.6% rise in new building permits issued in February, up from the 5.1% decrease we saw in January.

Given the recent Loonie-bullish environment, better-than-expected results from this report could just push USD/CAD further down to break its descending channel!

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After reaching an intraday low of .9625, the Loonie flew to a high of .9570 against the dollar as if it was wearing the new Jordan Fly Wade. Ha! At the end of the day, USD/CAD landed at .9589 with a 14-pip win for the Loonie.

The top-tier building permits report might have been the rocket fuel that allowed the Loonie to continue its winning streak. The figure for February came in at 9.9% and beat the forecast which was for a measly 1.9% uptick. Of course, the better-than-expected figure made a lot of market junkies all the more reason to be confident on Canada’s economy.

I wonder if the employment report will also impress markets. Due at 11:00 am GMT, analysts have their hopes up that the Canadian labor market generated a net total of 27,800 jobs and that the unemployment rate slowed by 0.1% to 7.7% in March.

Also scheduled to be released later is the housing starts report for the same month. Take note that the consensus is for a modest decrease in the number of new residential buildings to 180,000 from 182,000 in February.

If you’re planning to root for the Loonie, make sure you keep your fingers crossed for better-than-expected figures!

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The Loonie looked about as fresh as the Fresh Prince as it forged fresh highs against the Greenback last Friday. Bulls went on a Loonie-buying frenzy during the Tokyo and London sessions, but they went missing in the New York session after seeing not-so-upbeat employment data. As a result, USD/CAD slid back from its intraday low of .9526 to finish the day 11 pips lower at .9574.

Just as economic nerds had forecasted, Canada’s unemployment rate dipped from 7.8% to 7.7% in March. What came as a surprise was that this improvement in the unemployment rate was accompanied by a decrease of 1,500 in employment!

March saw a slight pullback in jobs, which is contrary to the 27,800 increase forecasts were expecting. But this wasn’t actually as big a downer as you would think because full-time work saw an increase of 90,600 in March, which means that the bulk of the losses belonged to part-time jobs.

Large growths in full-time jobs such as this could translate to greater job and income security, which may cause consumer spending to pick up down the line. Now that ain’t that bad, right?

As for last Friday’s housing starts data… Well, it was all good! A total of 189,000 houses began construction last month, beating forecasts for 180,000 and the previous month’s record of 184,000.

So how does this all play into the Bank of Canada’s big interest rate decision tomorrow at 1:00 pm GMT? Well, given the string of positive reports that Canada’s been pumping out lately, you can expect the BOC to sound upbeat for its recovery. However, don’t expect it to sound too hawkish! The Loonie’s recent strength has been causing trouble for Canada’s exporters, and the last thing the BOC would want to do is to boost its currency and hurt its exports even more.

Since there’s nothing important coming out of Canada today, y’all should keep an eye on risk sentiment and commodities while waiting for tomorrow’s BOC decision. Peace out and good luck, kids!

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Zzzzzz…. With no data on deck, there was barely any movement on USD/CAD. The pair traded within a range of just 36 pips, and ended up forming a doji on the daily chart as it closed at its opening price of 0.9564.

Interestingly, the Loonie stayed still even though its comdolls sibling the Aussie and Kiwi dropped in yesterday’s trading. Could this be a sign that the Canadian dollar is the mightiest of them all?

If you feel like trading CAD pairs today, you might wanna wait till the New York session, as we’ve got a couple of high impact events heading our way.

First, trade balance figures are due at 12:30 pm GMT. Word around the Rockies is that the Great White North posted a trade surplus of 600 billion CAD during the month of February. I wonder though – could this be a direct result of the recent surge in oil prices?

Later on at 1:00 pm GMT, the Bank of Canada will be making its monthly interest rate decision. Now, nobody is expecting the BOC to raise rates, but watch out for the accompanying statement. The Canadian economy has been on a roll, but one reason why the BOC has showed a reluctance to raise interest rates is because of the strength of the Canadian dollar. Raising rates would only strengthen the Loonie but this may hurt exports down the road.

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Aha! Is this a pullback I see with the Loonie or is it about to reverse? USD/CAD seems to have bottomed out at the .9950 area after crude oil sank back below the 110.00 handle. Have the crude oil and Loonie rallies come to an end?

Crude oil prices retreated from their recent highs yesterday as Libyan Prime Minister Gaddafi accepted the African Union Peace Plan. This convinced most traders that the turmoil in Libya was nearing its end and that they no longer need to worry about oil supply. Still, Libyan rebels seemed unhappy with this resolution because it didn’t guarantee that Gaddafi would step down. I’d keep tabs on the situation in Libya to find out whether oil prices could keep rising or not.

Today is a big day for Canada as it gears up to release its trade balance data and to find out what the BOC has in store. The trade balance report, which is due 1:30 pm GMT, could show that their surplus expanded from 0.1 billion CAD to 0.6 billion CAD in February. Meanwhile, the central bank is expected to keep rates on hold at 1.00% during their policy statement at 2:00 pm GMT. Keep in mind that the rising Loonie probably did some damage on their trade figures and the BOC could start talking down their currency.

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No rate hike means no love for the Loonie! The Canadian currency fell under bearish sentiment yesterday after the Bank of Canada disappointed the markets with its decision to leave interest rates unchanged. As a result, USD/CAD formed a bullish daily candlestick, climbing 65 pips to close at .9629.

The BOC may have delivered hawkish remarks by raising its 2011 GDP forecast from 2.4% to 2.9% in its rate statement yesterday, but it clearly wasn’t enough to please the crowds. Its reluctance to raise interest rates left traders upset, and they showed their disappointment in the steep Loonie selloff.

Taking a look at its most recent trade balance figures, it’s easy to see why the BOC decided to sit on its hands. As I mentioned before, the BOC has been expressing a lot of concern about the negative impact the Loonie’s strength has had on its exports industry.

With its 382 million CAD trade surplus shrinking to 33 million CAD in February, it seems the BOC does have reason to worry. For the first time in five months, exports declined 4.9% in the Month of Hearts, and chances are the Loonie’s recent strength had a hand in this.

The action continues later today with the BOC monetary policy report at (2:30 pm GMT) and press conference at (3:15 pm GMT). The BOC may have decided to hold rates steady this time around, but if they deem it necessary to increase rates to curb inflation down the line, it could send the Loonie northward again!

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Whew, that was close! The Loonie ended yesterday’s trading with a 5-pip win against the dollar after an intense joust for pips. USD/CAD bottomed at .9587 before rallying to its intraday high of .9655. Just before the day came to an end, it traded lower and closed at .9625.

I think it might have been the BOC’s wariness about hiking interest rates that almost cost the currency its win yesterday. According to the BOC Monetary Policy report, BOC Governor Mark Carney and his central bank amigos didn’t raise interest rates because they think that the strong Loonie may already take a huge toll on exports and growth.

The report suggested that the central bank doesn’t see the current rate of inflation as a big threat to the economy. Great! That’s just another reason for it to delay tightening. Boo!

For today, you may want to keep tabs on the commodity markets given that our economic calendar is blank for reports from Canada. Take note that the Loonie usually rises with oil as it is the country’s biggest export.

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The Loonie was acting loony yesterday as it bobbed up and down inside a 50-pip range against the Greenback. USD/CAD bounced at the .9600 handle but changed its mind upon reaching the .9650 minor psychological level. Will it be able to find a clearer direction today?

USD/CAD’s indecisive movement can probably be explained by the weak economic figures released by both U.S. and Canada. Canadian manufacturing sales turned out to be a disappointment as the report printed a 1.5% decrease, which fell short of the expected 0.6% uptick. Its new motor vehicle sales report also posted a downside surprise as it showed a 0.6% drop instead of the projected 2.8% surge.

Despite these worse than expected results, the Loonie’s drop was limited when Uncle Sam also unveiled his share of poor data. U.S. PPI and jobless claims both missed expectations, causing USD/CAD to drop back down.

Canada won’t be releasing any economic reports today, which means that USD/CAD’s action could be strongly influenced by U.S. data. There are plenty of reports due from the U.S. today so make sure you also check my U.S. economic roundup to find out what’s in store!

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With no data on deck, USD/CAD trading was as tight as Big Pippin’s disco pants. The pair traded within a tight range of just 57 pips, closing the day 3 pips higher at .9601.

With China recently hiking rates, the Canadian dollar has had some trouble lately to edge higher. Remember, Chinese growth has been one of the major factors for the rising price in oil. With the Canadian dollar being highly correlated to oil prices, then any news that could mean less demand for oil will indirectly weigh down the CAD.

For today, the foreign securities purchased report is scheduled for release at 12:30 pm GMT. The report measures investor demand for Canadian bonds and is reflective of demand for the Canadian dollars as investors must first purchase the local currency if they want to buy that country’s bonds. Expectations are that foreigners bought 11.23 billion CAD worth of Canadian government bonds. The past two months, the actual figure has beaten the forecast. Will today’s report make it three in a row?

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Just like other major currencies, the Loonie gave up a lot of ground in yesterday’s trading session due to a strong case of risk aversion. USD/CAD rose as high as .9722 intraday before settling at .9643. All in all, the pair clocked in a 50-pip gain from its opening price.

In addition to risk aversion, the poor result on the foreign securities purchases report pushed the Loonie lower. The report failed to meet expectations and showed only a 2.50 billion CAD surplus, not even a quarter of the forecast of 11.2 billion CAD.
The action on the CAD’s chart continues later today with the country’s consumer price index (11:00 am GMT), the leading sales index (1:30 pm GMT), and whole sales report (also at 1:30 pm GMT).

Among the three, pay closer attention to the CPI, as it will be the one that will move the CAD. The CPI is expected to jump to 0.7% from 0.4% while the core version of the report, which excludes the volatile items such as food and energy, is predicted to rise to 0.3%. If the actual figure comes in higher than forecast, then we could see the CAD regain its losses from yesterday!

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Boom baby! That’s how you handle your business! Thanks to some good economic data and overall improved risk appetite, the Canadian dollar trampled all over its American counterpart. USD/CAD closed 97 pips lower for the day, finishing at .9565. Up next, .9500?

The Loonie benefitted from strong CPI figures, which completely blew past expectations. Year-on-year, inflation was at 3.3% during March, way higher than the 2.2% figure posted in February. On a monthly basis, consumer prices rose 1.1% in March, after it was expected that inflation would be at 0.7%.

These strong inflation figures sparked speculation that the Bank of Canada may need to raise interest rates soon. The BOC’s problem though, is that the Canadian dollar has been a total beast lately. BOC officials fear that raising interest rates would only strengthen the Canadian dollar, which could undermine exports down the road.

In other news, wholesale sales dropped 0.6% last March, after it was expected to rise by 0.1%. Still, I don’t think people paid much attention to this report. Remember, inflation and interest rates are the major market drivers right now, so traders are normally focused on those reports.

No data on the docket today, so we might not see as volatile trading as we’ve seen over the past couple of days. Still, better stay on yours toes because you never know what might happen!

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Looks like the Loonie got on the risk appetite train yesterday! Despite the lack of economic reports from Canada, USD/CAD dropped to a fresh low at .9497 before it closed with a 32-pip loss at .9533.

Maybe the weaker-than-expected wholesale sales report I mentioned yesterday dampened the Loonie bulls’ vibes because from the other angles, the Loonie still has room to rise. Prices of oil, Canada’s biggest export, rose for the third day in a row on more dollar weakness. And don’t forget that risk appetite has been crazily pushing the comdolls higher lately!

Today at 1:30 pm GMT Canada will release another potential mover for the Loonie – its retail salesreport for February. Though markets are expecting the report to show another 0.5% growth from its 0.3% rise in January, others are also worried that the worse-than-expected wholesale sales report might have set the tune for Canada’s retail sales. In any case, keep close tabs on this one for any surprises!

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Yawn! Is there anything more boring than USD/CAD’s price action last Friday? Due to the absence of economic data and traders celebrating Good Friday, the pair’s price action was… well, dead. If you look at the pair’s movement, you’d see that the pair just traded within a very narrow 27-pip range!

Similar to other major economies, Canada’s forex calendar last Friday was empty. This week, however, could be different since the very important Canadian GDP report is scheduled to come out on Friday. It is predicted to show that the Canadian economy DID NOT grow February after it grew 0.5% in January.

Let’s see whether the Canadian GDP report will be able to shake the Loonie and create some movement in the charts this week!

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After dipping to a low of .9504, USD/CAD rallied to its intraday high of .9562 before ending the day 20 pips higher from its opening price at .9546. Why was the Loonie acting looney?

Without any economic report released yesterday, some market junkies think that the pullback in oil might have kept the Loonie from rallying.

Our awesome forex calendar is still blank for reports from Canada today, so you may want to keep tabs on the commodities markets to help you gauge which direction the Loonie is headed. Good luck!