Fundamental Summary

Monthly Survey of Manufacturing, August 2016 Full Report
Manufacturing sales increased 0.9% to $51.1 billion in August, reflecting higher sales of food, primary metal, and petroleum and coal products. Sales were up in 15 of 21 industries, representing 69% of the total Canadian manufacturing sector. The increase reflected a higher volume of goods sold, as constant dollar sales rose 1.2%.

Employment Insurance, August 2016 Full Report
Regular Employment Insurance (EI) beneficiaries in Canada totalled 563,000 in August, down 3.0% from the previous month. This decrease followed a 5.0% increase in July, when legislative changes to the EI program came into effect. On a year-over-year basis, the number of beneficiaries was up 23,700 (+4.4%).

Retail trade, August 2016 Full Report
Retail sales edged down 0.1% to $44.0 billion in August. Lower sales at motor vehicle and parts dealers, and general merchandise stores were the main contributors to the decline. Excluding these two subsectors, retail sales were up 0.2%. Sales were down in 7 of 11 subsectors, representing 57% of retail trade. After removing the effects of price changes, retail sales in volume terms decreased 0.3%.

Consumer Price Index, September 2016
Full Report
The Consumer Price Index (CPI) rose 1.3% on a year-over-year basis in September, following a 1.1% gain in August. Excluding gasoline, the CPI was up 1.5% year over year in September, after posting a 1.7% increase in August.

Monetary Policy Report Full Report
The Bank’s mandate is to conduct monetary policy to promote the economic and financial well-being of Canadians. Canada’s experience with inflation targeting since 1991 has shown that the best way to foster confidence in the value of money and to contribute to sustained economic growth, employment gains and improved living standards is by keeping inflation low, stable and predictable. In 2011, the Government and the Bank of Canada renewed Canada’s inflation-control target for a further five year period, ending 31 December 2016. The target, as measured by the total consumer price index (CPI), remains at the 2 per cent midpoint of the control range of 1 to 3 per cent. The outlook for inflation is subject to several upside and downside risks emanating from both the external environment and the domestic economy. Overall, the Bank assesses that the risks to the projected path for inflation are roughly balanced. As in past reports, the focus is on a selection of risks identified as the most important for the projected path for inflation, drawing from a larger set of risks taken into account in the projection.

1. Stronger real GDP growth in the United States:
The Bank’s projection for US potential GDP growth could reflect an overly conservative interpretation of labour market and productivity trends. In addition, global uncertainty has increased recently, exacerbated by heightened political uncertainty and rising protectionist sentiment. Either favourable dissipation of this uncertainty or stronger growth in the structural drivers of the US economy could result in improved US business confidence and investment, with positive spillovers for Canadian exports.

2. Higher Oil Prices
Strengthening demand, as well as supply constraints, could contribute to higher oil prices. Higher-than-expected oil prices would improve Canada’s terms of trade and provide a boost to wealth and household spending in Canada.

3. Sluggish business investment in Canada
The recent weakness in business investment could reflect more persistent structural factors. Over time, weaker business investment would also reduce capital deepening and lower potential output, partially mitigating the disinflationary effect of weaker demand.

4. Slower growth in emerging-market economies
Growth could be slower in some EMEs, particularly commodity exporters and those with elevated US-dollar-denominated debt. There are risks around China’s rebalancing, particularly given a further buildup of financial imbalances. Slower EME growth could affect Canada through weaker commodity prices and export sales, as well as through greater global uncertainty and financial volatility.

5. Weaker household spending
Given the high level of household indebtedness, households may also become more prudent, restraining consumption and housing expenditures. Weaker-than-expected household spending would have a direct negative impact on real GDP.

European Parliament head says will try to save Canada-EU deal Reuters
The head of the European Parliament said late on Friday he would hold emergency talks in a bid to save a free trade deal between the European Union and Canada that looks to be foundering amid protracted disagreements. Hours earlier, Canadian Trade Minister Chrystia Freeland walked out of talks in Belgium, declaring that the EU was incapable of sealing the deal. All 28 EU governments support the Comprehensive Economic and Trade Agreement (CETA), but Belgium cannot give assent without backing from its five sub-federal administrations, and French-speaking Wallonia has steadfastly opposed it.

Commitment of Traders Report
The COT report released on Friday indicates a further increase in long and short positions and a slightly lower close price (as of last Tuesday) and slightly lower net non-commercial positions. Note this data was drawn up before the monetary policy meeting on Wednesday last week.

Technical Summary

USDCAD Daily

At the start of the month bulls entered at the monthly central and drove price up to MR1 where bears sold to 1.300 before bulls pushed price back above MR1 with price closing at MR1 at the end of last week.

USDCAD H4

At the start of the week bears sold off of the weekly central with a target of WS2. Price shot down after the release of the interest rate decision to WM1 though quickly moved higher during the press conference closing at WM4.

CADJPY Daily

Profit taking and buying at the end of September into the begining of October took price from September's MS3 just short of October's MR1 where bulls took profit and bears entered taking price down to monthly central. Price closed just above monthly central on Friday.

CADJPY H4

Price opened high at the start of the week at WM3 with the 21 EMA playing as dynamic support though bears entered above WM3 and profit taking along with selling saw price drop to weekly central. Price closed just below 78.00 on Friday.

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