Last week recap 05 – 09 Dec
Last week we didn’t see significant economic data out of Canada, with key events being BOC Rate Statement & the Overnight Rate Decision. Tuesday began with the release of the Canadian Trade Balance Figures that posted better @ -1.13B, while the previous reading as -4.38B. Ivey PMI (Nov) however failed to meet expectations posting @ 56.8, lower than the expected 59.9. This past Wednesday Bank of Canada announced its interest rates that was in line with consensus @ 0.50%. This is due to the Bank’s Governing Council ruling that the current monetary policy remains appropriate.
Building permits printed @ 8.7% better than the previous -4.6%. New Housing Price Index was also well over predictions, reading @ 0.4% than the expected 0.2%. We might see yields of Canada’s bonds fall below those of the U.S. Global bond yields have risen as investors anticipate the FED to increase rates, which will affect Canadians in debt because borrowing costs will rise. Investors predict Canadian yields will eventually reach a limit & expect 2-year yields to fall below its U.S counterpart by the end of 2017 as BoC has shown no interest to follow FED increases.
Oil on the other hand helped the performance of the Canadian dollar. WTI was trading above $51 per barrel ahead of OPEC meeting in Vienna this past weekend. In the meeting it was noted that OPEC members decided during their last meeting to implement production adjustments of 1.2 million barrels a day, effective from 1st January 2017. In agreeing to this, OPEC member countries confirm that they will stay committed in stabling & balancing oil markets.
THE WEEK AHEAD
The Canadian economic calendar is rather quiet this week, with just Manufacturing Sales (0.7%), a speech by BoC Governor Poloz, and Foreign Securities Purchases being the only events on the economic calendar.
US Dollar vs Canadian Dollar
Last week we saw the loonie reach a two month high against the dollar, getting its strength largely from crude oil on Friday. This week may prove to be a turning point for USDCAD as we may see a steady halt of loonie strength against the dollar. The U.S FED rate decision in Wednesday will probably be the main cause of USDCAD turning point. Its important to note that the U.S economic calendar is very busy this week and other economic releases like the Philadelphia FED Manufacturing Index & Building Permits will likely affect the performance of USDCAD. Keeping an eye on fundamental releases this week will be crucial if you plan to trade this pair.
Canadian dollar vs Euro & Great British Pound
Last week the ECB left interest rates unchanged but extended stimulus measures with tapering. Italy’s referendum of ”no” vote led to the resignation of Italian Prime Minister Matteo Renzi. The U.K parliament invoked Article 50 to begin the U.K exit from the European Union. This week features key economic releases including the MPC’s official Bank on Thursday, as well as the ECB’s Long Term Refinancing Operation results.