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USD/CAD steady near 3-week lows after U.S. durables data
The U.S. dollar was little changed against the Canadian dollar on Wednesday after data showing an unexpected slump in U.S. orders for long lasting manufactured goods last month raised concerns over the outlook for first quarter growth.
USD/CAD was flat at 1.2501, holding above Tuesday’s three-week lows of 1.2426.
The Commerce Department reported that durable goods orders fell 1.4% last month, compared to expectations for a gain of 0.4%.
January’s orders were revised down to a 2.0% increase from a previously reported increase of 2.8%.
Core durable goods orders, which exclude transportation items, slipped 0.4%, against forecasts for a 0.3% gain.
Orders for core capital goods, a key barometer of private-sector business investment fell 1.4%, the sixth consecutively monthly decline.
Business spending has likely been hit by the stronger greenback, while lower energy prices have also acted as a drag.
The greenback remained supported after data on Tuesday showing an uptick in underlying inflation indicated that the Federal Reserve would still have leeway to tighten monetary policy even with inflation running below target.
The dollar has come under pressure since the Fed indicated last week that it may raise interest rates more gradually than markets had expected.
Elsewhere, the dollar was lower against the euro and the yen, with EUR/USD up 0.49% to 1.0978 and USD/JPY sliding 0.17% to 119.54.
The euro gained ground on Wednesday after data showing German business confidence improved this month boosted the outlook for the euro area’s largest economy.
The Ifo Institute said its business climate index rose to 107.9 this month, up from 106.8 in February. Economists expected a reading of 107.3.
EUR/CAD was up 0.33% to 1.3691, off highs of 1.3763.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.3% to 97.14, pushed lower by the stronger euro.
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USD/CAD: Loonie Back at $1.25 Level Amid Sliding Oil Prices
The Canadian dollar lost ground on Friday as oil prices reversed their gains and tumbled. Meanwhile, traders digested US macro data and eyed the upcoming speech from Federal Reserve (Fed) Chair Janet Yellen.
The loonie fell 0.19% to C$1.2506 against the greenback, after reaching an intraday low of C$1.2526.
"USD buyers appear to have re-emerged. The USD is benefited from the continued grind higher in US front-end yields, at least in part attributable to continued recovery in crude prices but also to hawkish comments from Atlanta Fed President Lockhart," BNP Paribas said in a research note.
Lower oil prices dragged down the resource-linked loonie, as tension in the Middle East eased and long positions were closed, erasing Thursday's 6% crude rally. WTI dropped 2.96% to $49.91 a barrel, while Brent also fell 2.42% to $57.76 a barrel.
Traders focused on Yellen’s speech, preparing for any comments regarding the latest FOMC outcome and the central bank's future moves. The Fed chief is due to speak in San Francisco at 19:45 GMT.
Analysts have pegged the upcoming speech as a potential high market mover. It follows a number of Fed speakers, who have expressed their support for a rate hike in 2015, after a rather dovish FOMC statement on March 18.
"Friday, the USD may get some more support from US rates if Fed Chair Yellen echoes the views of other FOMC members that the Fed is likely to hike rates this year," BNP Paribas said.
The start of this week was marked by a bearish greenback trend, triggered by last week’s FOMC statement. It revealed that the US economic outlook was not quite as bright as previously thought, signaling that interest rates would probably rise at a slower rate than anticipated.
After the statement last week, Yellen told reporters that "just because we removed the word patient from the statement doesn't mean we're going to be impatient."
US data
The third estimate of US GDP for the fourth quarter showed an expansion of 2.2% on an annualized base, a slowdown from the 5.0% seen during the third quarter of last year.
Meanwhile, the University of Michigan Consumer Confidence Index reached 93.0 points, beating the estimate of 92.0, rising from 91.2 previously.
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USD/CAD Forecast Mar. 30 – Apr. 3
The Canadian dollar showed some strength during the week, but ended the week almost unchanged. USD/CAD closed just above the 1.26 line. It’s a quiet week, with just three events this week. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
There were no Canadian economic releases last week. In the US, inflation beat expectations and New Home Sales were also stronger than expected. However, durable goods orders and GDP missed their estimates.
Canadian Feb industrial product price +1.8% vs +0.9% expected
Could be that the soft Canadian dollar is pushing up import prices. It's nowhere near the type of thing that would cause the Bank of Canada to rethink a rate cut.
Loonie Surges to One-Week High After Disappointing US Payrolls
The Canadian dollar strengthened on Friday in light of the US dollar's broad-based downward trend, triggered by worse-than-expected non-farm payrolls data.
The loonie was up 0.92% trading at C$1.2446 against the greenback. Earlier in the session the pair reached C$1.2434 - the highest level for the loonie in a week.
The greenback retreated against most of its major peers on Friday, as traders reacted to non-farm payrolls rising just 126,000 in March, the least since January 2012, which is far below the 245,000 gain expected by the market, according to data from the Department of Labor.
The figures from the previous two months have also been revised, with payrolls in February and December lower at 264,000 and 201,000, respectively, representing a net loss of 69,000 jobs compared to the previous estimate.
Meanwhile, the unemployment rate remained at 5.5% in March, matching analysts' forecasts, which is the lowest reading since mid-2008.
"Payrolls were weaker than expected. The report could add to fears that the trend in growth in slowing significantly, although there is no sign of weakening in jobless claims," chief US economist at High Frequency Economics, Jim O'Sullivan, said in a research note.
There were no Canadian releases on Friday, but traders still digested better-than-expected Thursday’s report showing that the trade gap narrowed in February, largely due to a rise in exports of energy products and a drop in imports. Also, an additional boost came from a massive upward revision to January's data.
National exports rose 0.4%, while imports fell 0.7%, leading to a $984 million trade gap – the fifth deficit in a row, Statistics Canada reported, adding that January's deficit was revised to $1.5 billion from $2.5 billion.
Moreover, oil prices offered no support to the resource-linked loonie on Friday, as WTI futures plunged 1.26% to $49.46 a barrel, while Brent futures edged up 0.04% trading at $55.12 a barrel.
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USD/CAD Forecast Apr. 6-10
The Canadian dollar started the week with strong gains, but was unable to consolidate and lost about 150 points on the week. USD/CAD closed at 1.2466. This week’s major events are Ivey PMI, Building Permits and Employment Change. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
Canadian GDP was a major disappointment, contracting for the second time in three months. In the US, the week started with strong numbers, led by an excellent consumer confidence report and strong unemployment claims. However, the week ended on a sour note, due to a very disappointing jobs report, raising speculation that the Fed may opt to sit on the sidelines until the second half of 2015 before raising interest rates.
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Canadian PMI Disappoints, Plunges Further Below 50.0 in March
Canada's Ivey PMI posted a slowdown in March, following a slightly better-than-expected level in February.
The gauge reached 47.9, where a reading above 50 indicates an expansion in purchasing activity. Analysts had estimated 51.1 would be posted during the third month of the year. In February the index was at 49.7.
The PMI, which is released by the Richard Ivey School of Business at Western University, measures monthly changes in economic activity based on a panel of purchasing managers from across Canada.
It includes the public and private sectors and consists of five categories: purchases, employment, inventories, supplier deliveries and prices.
"The Employment Index for March 2015 was 45.1, the Inventories Index was 57.9, the Supplier Deliveries Index was 45.0 and the Prices Index was 59.5," the release said.
Traders are also waiting for the Business Outlook Survey and Senior Loan Officer Survey scheduled to be released shortly after Ivey PMI.
"Look for regional divergence to be a major theme, as the Prairies struggle, while Central Canada is more optimistic," BMO Capital Markets vice president and senior economist Benjamin Reitzes said in a research note.
However, the most anticipated release this week is the employment data, scheduled to be published on Friday. Economists estimate to see a drop of 10,000 jobs, with the unemployment rate ticking up to 6.9%.
"Look for a 10,000 drop in employment in March, with the goods sector expected to struggle. The oil patch continues to shed jobs, while manufacturing isn’t expected to be a meaningful positive for employment until much later this year," Reitzes said.
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Canada's Employment Shocks with Part-Time Gains, Jobless Rate at 6.8%
The part-time sector gave an unforeseen boost to March's employment data in Canada, which was enough to keep the unemployment rate at 6.8%.
The economy added 28,700 jobs during the third month of the year, after shedding 1,000 positions in February, Statistics Canada reported on Friday.
The data caught the markets off guard, as analysts' consensus estimated to see jobless rate tick up to 6.9% with no change to employment.
To top it off, better-than-expected growth has offered support to the Canadian dollar, which has been struggling against its rising US peer.
On a yearly basis, Canada created 138,000 new positions and participation rate ticked up to 65.9% during the month.
Service side
The majority of the gains were in retail and wholesale trade, as 20,000 more people were employed by the industry – first increase since October. Transportation and warehousing also surprised with 16,000 new positions.
Moreover, the natural resource industry, which has been losing payrolls for the past two months, posted a modest gain worth 6,300 jobs.
All of the newly created positions were in the part-time sector, which employed 56,800 more people in March – the biggest increase in eight months. Meanwhile, the full-time sector cut 28,200 positions.
Some of the growth was offset by declines in construction work, agriculture and public administration.
Youth employment once again remained largely unchanged, while women aged 55 and over gained 18,000 jobs.
If adjusted to the American concepts, Canada's unemployment rate was at 5.9% in March, compared with 5.5% in the US.
Economists are projecting to see weaker employment down the road due to the negative effects of the lower oil prices on the oil-dependent provinces.
"The biggest impact to the economy will happen in the middle of this year. Companies will be cutting their projects and provincial governments will be cutting their budgets. More so toward the second and third quarters," CIBC World Markets economist Nick Exarhos told WBP Online.
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USD/CAD: Loonie Jumps on US Weakness, Data Misses Estimates
Canada’s dollar surged to $1.24 level on Tuesday, after US data disappointed, weakening the greenback all across the board.
The Canadian dollar rose on the back of US losses on Tuesday, as lower-than-expected US retail sales and the IMF’s downgrade to the US growth outlook weighed on the USD/CAD pair.
The loonie climbed 1.08% to C$1.2461 against the greenback, after reaching the intraday high of C$1.2451 earlier in the session.
"The strength in the CAD is twofold and none of it is coming from Canada. Market is taking back US dollar-long positions after a miss in retail and the IMF downgrade to the US growth expectation for 2015," managing director of foreign exchange at National Bank Financial, Jack Spitz, told WBP Online.
"We are seeing a wide sell-off of the US dollar. Right now positions are squaring … All currencies, Canada included, are trading higher. There is also a dollar pickup in WTI," he added.
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BoC to Embrace Wait-and-See Attitude Toward Rates
Canada's central bank is expected to hold its interest rate steady at 0.75% for a second meeting in a row in April, while closely monitoring the "front-end loaded" plunge in the first quarter and a potential recovery soon after.
Ottawa - The chances the Bank of Canada (BoC) will cut rates on Wednesday are low, with the majority of economists projecting no change, after Governor Stephen Poloz signaled that it is better to wait before easing further.
The interest rate announcement along with the Monetary Policy Report (MPR) will be published at 10am EDT on Thursday.
Even though the consensus is not expecting to see any surprise moves this time around, the market is pricing in another rate cut some time later this year. Also, it is important to keep in mind that nothing should be ruled out completely, as Poloz is capable of surprising everyone, judging by the shocking move to cut rates back in January.
"Markets still expect a rate cut by the end of the year. But for April, most people think that the BoC will stay put on rate," senior economist at National Bank of Canada, Krishen Rangasamy, told WBP Online.
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