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USD/CAD Outlook ahead of the Canadian GDP data – September 2014
The Canadian dollar was mostly flat against most of its peers while it weakened a bit against the Greenback. Today’s key risk for the Canadian dollar is the release of the monthly GDP data, which is expected to be soft posting a 0.2% growth down from 0.3% last month. Most notably, the USDCAD and EURCAD are two pairs to bear in mind in lieu of today’s GDP data release.
The following table gives a snapshot of the important aspects that could influence the outcome of today’s GDP report. Bear in mind that besides the GDP m/m, the annualized GDP y/y will be released with the expectations of a slowdown to 2.8%, from 3.1% previously.
According to RBS, their view on Canadian GDP is bullish on account of trade surplus in July and a better than expected rise in manufacturing sales. A better than expected outcome could see the CAD crosses declines across the board riding on the loonie’s strength, especially against weaker currencies such as the Australian and Kiwi Dollar. The pairs are unlikely to react much if data comes in line with expectations. A worse than expected GDP reading could see the USDCAD rally higher while provide a short term corrective rally in the CAD cross currency pairs.
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Canada’s Industrial Product Price Index 0.2% vs. -0.2% forecast
Canada’s industrial product price index rose more-than-expected last month, industry data showed on Tuesday.
In a report, Statistics Canada said that Canada’s Industrial Product Price Index rose to 0.2%, from -0.3% in the preceding month.
Analysts had expected Canada’s Industrial Product Price Index to rise to -0.2% last month.
Canadian GDP flat in July
Canada's economy stagnated in July, fuelling concerns over the country’s economic outlook, official data showed on Tuesday.
In a report, Statistics Canada said gross domestic product was flat in July, compared to forecasts for growth of 0.2%. Canada’s economy expanded by 0.3% in June.
Canada’s gross domestic product expanded at an annualized rate of 2.5% in July, missing expectations for growth of 2.8% and following growth of 3.1% in the preceding month.
USD/CAD was trading at 1.1196 from around 1.1161 ahead of the release of the data.
Canadian Dollar Falls to Six-Month Low on Trade Deficit
The Canadian dollar fell to its lowest point in six months against the U.S. dollar after the nation posted an unexpected trade deficit in August, bolstering the Bank of Canada’s cautious outlook on the economy.
The currency rose against most of its other major peers, including the Australian and New Zealand dollars, after data showed the jobless rate in the U.S., Canada’s largest trading partner, fell to a six-year low in September. The Bank of Canada has held its benchmark interest rate at 1 percent for four years and maintained last month it is as likely to lower borrowing costs as raise them while it waits for signs of a sustained export recovery that can power economic growth.
“It does suggest the improvement we’d seen in the trade sector is waning a little bit,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank, said by phone from Toronto. “The bank appears to be somewhat justified in its cautious outlook for the Canadian economy and will probably continue to talk cautiously going forward.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell as low as C$1.1248 per U.S. dollar, the least since March 21, before trading down 0.8 percent at C$1.1244 as of 10:05 a.m. in Toronto. One loonie buys 88.93 U.S. cents.
Canada’s C$610 million ($543 million) deficit followed a July surplus that was pared to C$2.20 billion from the initial C$2.58 billion estimate. None of the 14 economists in a Bloomberg survey predicted that Ottawa-based Statistics Canada would report a trade deficit today, and the median estimate was for a C$1.6 billion surplus.
Other data today showed the U.S. jobless rate fell to 5.9 percent in September as payrolls grew by 248,000 positions following a 180,000 August increase that was bigger than previously estimated, the Labor Department reported in Washington. The median forecast of economists in a Bloomberg survey called for a 215,000 advance. The unemployment rate fell to the lowest level since July 2008 from 6.1 percent.
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Canadian dollar could challenge lows on OPEC discord
Reports from the OPEC meeting are emerging and it seems that the member states are unable to agree on a reduction in production despite the falling oil prices.
Oil prices could further decline and this could add pressure to the already sensitive Canadian dollar.
Member states such as Saudi Arabia have exceeded quotas in the past, but everyone seemed to be happy when oil prices were stable and high and everybody was making money. In addition, the share of OPEC’s oil in global production has been falling in the past decades, and most recently with the shale oil and gas revolution in the United States.
The Canadian dollar moves on domestic economic indicators, expectations from the Bank of Canada and demand from the United States. Oil prices also have a role. Even though this role isn’t that big, the C$ is an a tight spot and every little push could take it to multi-year highs.
Following the excellent Non-Farm Payrolls report in the US, the greenback stormed the board and the loonie could not withstand the pressure.
The Canadian dollar tumbled down. USD/CAD reached a high of 1.1270, just a few pips from the peak of 1.1277 seen earlier in the year.
Beyond this line, its back to levels last seen in early 2009.
Can this happen early in the week, when trading liquidity is thin? We’ll know soon enough. Later on, Canada’s jobs report is the main event.
Reports from the OPEC meeting are emerging and it seems that the member states are unable to agree on a reduction in production despite the falling oil prices.
Oil prices could further decline and this could add pressure to the already sensitive Canadian dollar.
Member states such as Saudi Arabia have exceeded quotas in the past, but everyone seemed to be happy when oil prices were stable and high and everybody was making money. In addition, the share of OPEC’s oil in global production has been falling in the past decades, and most recently with the shale oil and gas revolution in the United States.
The Canadian dollar moves on domestic economic indicators, expectations from the Bank of Canada and demand from the United States. Oil prices also have a role. Even though this role isn’t that big, the C$ is an a tight spot and every little push could take it to multi-year highs.
Following the excellent Non-Farm Payrolls report in the US, the greenback stormed the board and the loonie could not withstand the pressure.
The Canadian dollar tumbled down. USD/CAD reached a high of 1.1270, just a few pips from the peak of 1.1277 seen earlier in the year.
Beyond this line, its back to levels last seen in early 2009.
Can this happen early in the week, when trading liquidity is thin? We’ll know soon enough. Later on, Canada’s jobs report is the main event.Nicely done!
Canadian housing starts 197.3K vs. 196.0K forecast
Canadian housing starts rose more-than-expected last month, official data showed on Wednesday.
In a report, Canadian Mortgage and Housing Corporation said that Canadian housing starts rose to a seasonally adjusted annual rate of 197.3K, from 196.3K in the preceding month whose figure was revised up from 192.4K.
Analysts had expected Canadian housing starts to rise to 196.0K last month.
Canadian Dollar Strengthens Against Peers as Jobless Rate Drops
The Canadian dollar rose versus most of its major counterparts after a report showed the nation’s jobless rate fell to a six-year low on the biggest monthly increase in employment since May 2013.
The currency strengthened after job creation more than tripled the average forecast of private sector economists and the economy created a record number of private sector jobs in September. The rise in payrolls comes after the country lost jobs the previous month and reports last week showed gross domestic product growth stalled in July and the country posted an unexpected trade deficit in August.
“The Bank of Canada has been talking about weakness in the labor market as an indicator of slack,” said Andrew Kelvin, senior fixed-income strategist at Toronto-Dominion Bank, by phone. “If you take them at their word on that, they have to regard this as a sign there’s less slack than maybe they believed a month ago. The prospect of a little bit quicker tightening, marginally speaking, implies a stronger Canadian dollar.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, was little changed at C$1.1191 per U.S. dollar at 9:41 a.m. in Toronto. One loonie buys 89.36 U.S. cents. The currency has strengthened 0.5 percent this week and is down 5.1 percent this year.
The unemployment rate fell to 6.8 percent last month, the lowest since December 2008 and down from 7 percent a month earlier, Statistics Canada said today in Ottawa. The economy created 74,100 jobs, the majority in full-time employment, after recording a decline of 11,000 jobs in August. Economists surveyed by Bloomberg News projected a 20,000 job increase and an unchanged unemployment rate, according to median forecasts.
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Canadian employment leaps 74.1K – USD/CAD falls
A blockbuster jobs report from Canada: a gain of 74.1K jobs in September, more times the early expectations. The unemployment rate dropped to 6.8% from 7% beforehand.
USD/CAD is sliding on the great news, but it seems the markets see it as too good to be true. The pair dropped from around 1.1210 to 1.1160, which is significant, but not proportional to the huge gain in jobs.
Canada gained 69.3K full time jobs and 4.8K part time jobs. The participation rate dropped to 66%, the lowest since 2001 but still above the US 62.7%.
Canada was expected to report a gain of 18.7K jobs in September, after a loss of 11K in August. The unemployment rate was predicted to remain unchanged at 7%. This time, these numbers got the full attention, as the US NFP report was already published.
USD/CAD was trading around 1.12 towards the publication.
See the preview: Canadian Employment Data: What To Expect & How To Position? -Credit Agricole
The Canadian authorities had some issues with reporting the employment data back in July, and hopefully this belongs to the past.
The pair has been rising mostly on the strength of the US dollar, but also due to the weakness in oil prices
USD/CAD Forecast Oct. 13-17
The Canadian dollar posted weekly gains for the first time in three weeks, as USD/CAD closed slightly below the 112 line. This week’s highlights are Manufacturing Sales and Core CPI. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
Canadian job data was outstanding, as Employment Claims jumped to their highest level in over a year. In the US, the dollar softened after unexpectedly dovish FOMC minutes, where the central bank expressed concern about the recent strength of the dollar against its major rivals.
* All times are GMT.
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