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USD/CAD: Loonie Gains After BoC Keeps Rates Untouched
The loonie jumped versus the greenback on Wednesday, after the Bank of Canada (BoC) kept rates on hold, while April's Monetary Policy Report (MPR) report delivered the latest update on the state of the nation's economy.
The Canadian dollar was up 0.22%, trading at C$1.2446 against its US peer, recovering from its intraday low C$1.2570, after the BoC left the interest rate steady at 0.75% for a second meeting in April as expected, after Governor Stephen Poloz signaled that would be better to wait before easing further.
The biggest change in the April’s MPR was the cut to first quarter (Q1) growth expectations, down to 0% from 1.5%, which points to the emerging negative effects of lower oil prices that “seem to be more front-loaded than expected in January,” the bank said.
Canadian inflation forecasts have been raised in April’s MPR, with core expected to advance 2.1% in Q1 and Q2, while the headline inflation is projected to accelerate to 1% and 0.8% in Q1 and Q2 respectively, up from 0.5% and 0.3%.
Statistics Canada reported on Wednesday that manufacturing sales fell 1.7% to $50 billion during the second month of the year. The figures caught markets off guard, as analysts' consensus projected sales would climb 0.1%.
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Preview : Hope for Canada’s Retail Trade as Gas Prices Rebound
Rising prices at gas stations are likely to boost sales and pull February’s retail trade out of the downward trend.
Retail sales are estimated to rise 0.5% during the second month of the year, according to analysts’ consensus, after plummeting 1.7% in January and 2% in December.
Core retail figures, which exclude automobile sales due to their tendency for volatility and potential to distort the underlying trend, are projected to jump 0.7%, after falling 1.8% in January.
Statistics Canada will report fresh retail sales figures on Friday at 1:30pm GMT.
An end to the negative retail trade figures could usher in further support for the Canadian dollar, which was rallying on Wednesday and Thursday, following the Bank of Canada’s (BoC) decision to leave its interest rate untouched at 0.75%.
Gas stations
Higher prices at gas stations will likely be one of the top contributors to better monthly sales, according to economists.
"We are going to see a pick up in February. Gasoline prices rebounded, so that should provide a bit of a boost. Autos continue to be a little bit weak," CIBC World Markets economist Nick Exarhos told WBP Online.
Consumers have been cautious with spending lately. "If your strip out auto and gasoline components, there is still some softness, given that consumers have been holding on to the money they saved on gas," Exarhos said.
The overall economic slowdown, triggered by the fall in oil prices, have added to consumers' worries.
"Outside of sales at gasoline stations, the combination of inclement weather across Eastern Canada and an uncertain outlook in commodity producing regions is expected to limit the magnitude and breadth of the rebound in the nominal headline," TD Economics said in a research note.
In addition, existing home sales are projected to show a marginal rise.
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USD/CAD weekly outlook: April 20 - 24
The Canadian dollar turned lower against the U.S. dollar in choppy trade on Friday, after a run-up to four month highs on the back of higher oil prices and a brighter outlook from the Bank of Canada prompted investors to take profits.
USD/CAD hit lows of 1.2089, the weakest since January 21 before pulling back to 1.2246 in late trade. For the week, the pair was still down 2.61%.
The Canadian dollar was boosted by a rally in oil prices and a shift in the BoC’s outlook on the economy. Stronger-than-expected inflation data on Friday and a rebound in retail sales also boosted the loonie.
Oil prices have been well-supported in recent sessions due to mounting expectations that U.S. shale oil production has peaked and may start falling in the coming months.
Canada is a major energy exporter and the currency’s value rises and falls along with the price of oil.
The loonie hit session highs after Statistics Canada said Friday that the annual rate of inflation ticked up to 1.2% in March from 1.0% the previous month. Economist had expected an unchanged reading.
Consumer prices were up 0.7% from a month earlier, ahead of forecasts for a 0.5% increase.
At the same time, data showed that retail sales rebounded 1.7% in February, after a 1.4% drop in the previous month.
The reports came one day after the BoC held its overnight cash rate at 0.75%, indicating that January’s rate cut has been sufficient to offset the negative impact of lower oil prices.
The bank said it expects economic growth to have stalled in the first quarter of 2015 as a result of the oil price shock, but expects growth to rebound in the second quarter and subsequently strengthen on a quarterly basis.
The central bank surprised markets with an unexpected rate cut in January, which Governor Stephen Poloz described as “insurance” against the effects of lower oil prices.
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USD/CAD slides to 1.22 - orders
Higher oil prices and less-hawkish comment from Poloz have weighed on USD/CAD today. A quick look at the orderboard:
Bids
Offers
Canada Feb wholesale trade sales -0.4% vs +0.5% expected
Note that Blomoberg had the consensus at +0.5% while Reuters said it was 0.0%. Estimates ranged from -0.7% to +1.5%.
USD/CAD holds steady near 3-month lows
The U.S. dollar held steady near three-month lows against its Canadian counterpart on Friday, as a tepid U.S. durable goods orders report failed to reassure investors concerning the strength of the nation's recovery.
USD/CAD hit 1.2103 during early U.S. trade, the pair's lowest since April 17; the pair subsequently consolidated at 1.2139.
The pair was likely to find support at 1.2084, the low of April 17 and a three-month low and resistance at 1.2271, Thursday's high.
Official data showed that U.S. durable goods orders rose 4.0% in March, beating expectations for a 0.6% gain.after a 1.4% decline the previous month.
Core durable goods orders, which exclude transportation items, fell 0.2% last month, confounding expectations for a 0.3% rise. February's figure wad revised to a 1.3% decline from a previously estimated 0.6% fall.
The data came after a recent string of downbeat U.S. economic reports prompted investors to push back expectations for a rate hike by the Federal Reserve.
The loonie was lower against the euro, with EUR/CAD rising 0.24% to 1.3176.
The euro strengthened after the Ifo Institute of Economic Research earlier reported that Germany's business climate index rose to a 10-month high of 108.6 in April from 107.9 in March, beating expectations for an uptick to 108.4.
USD/CAD forecast for the week of April 27, 2015
The USD/CAD pair went back and forth during the course of the week essentially settling nothing. Because of this, we are going to step away from this pair at the moment, but recognize that a break either below the lows from the previous week, or break above the top of the range for this week could offer some type of signal. In the meantime though, we think it will be much more comfortable to trade from the daily charts, and as a result we are placing a long-term trade at the moment.
USD/CAD Forecast Apr. 27 – May 1
The Canadian dollar had a quiet week, posting slight losses. USD/CAD closed the week at 1.2167. This week’s major highlight is GDP. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
In the US, there was some good news on the housing front, with existing home sales beating expectations. However, New Home Sales failed to keep pace and Durable Goods Orders were a mixed bag. In Canada, Wholesale Sales disappointed with a second straight decline.
source
USD/CAD falls to fresh 3-month lows on U.S. GDP data
The U.S. dollar fell to fresh three-month lows against its Canadian counterpart on Wednesday, after data showed that the U.S. economy grew less than expected in the last quarter and as markets eyed the Federal Reserve's upcoming policy statement.
USD/CAD hit 1.1994 during early U.S. trade, the pair's lowest since January 20; the pair subsequently consolidated at 1.2006, shedding 0.21%.
The pair was likely to find support at 1.1031, the low of January 20 and resistance at 1.2118, Tuesday's high.
The Commerce Department reported that the U.S. gross domestic product grew at an annual rate of 0.2% in the three months to March, below expectations for growth of 1%. The U.S. economy expanded by 2.2% in the previous quarter.
The report added to a recent string of disappointing data which has prompted investors to scale back expectations on the timing of a first rate hike by the U.S. central bank.
Investors were now looking ahead to a report on pending home sales later in the day for further indications on the strength of the recovery, ahead of the Fed's policy announcement.
In Canada, data on Wednesday showed that raw materials prices fell 0.9% last month, compared to expectations for a 1.8% decline. March's figure was revised to a 5.9% rise from a previously estimated increase of 6.1%.
The loonie was lower against the euro, with EUR/CAD rising 0.34% to 1.3258.
In the euro zone, data showed that German consumer price inflation accelerated at an annualized rate of 0.4% this month, meeting forecasts and compared to a reading of 0.3% in March.
Month-over-month, German consumer prices dipped 0.1% in April, also in line with expectations, after climbing 0.5% in the preceding month.
source
Preview: Canada’s GDP to Contract as Oil Shock Stifles Growth
The oil price shock is set to batter Canadian economic growth throughout the first quarter, including February, as industrial production likely declined along with poor manufacturing data mixed in with unseasonably cold winter weather.
Canada’s GDP is projected to contract 0.1% during the second month of the year, following the same decline in January, according to analysts’ consensus. Measured year-on-year, the gauge is estimated to slow its pace from 2.4% down to 1.9%.
A bigger-than expected slowdown could put an end to this week’s ascension of the Canadian dollar versus its US peer, triggered by soft US macro data.
Fresh GDP numbers will be released by Statistics Canada at 1:30pm GMT on Thursday.
Industrial production
One of the major downward catalysts will be lacking industrial production, more specifically oil and gas extraction, an economist at Capital Economics, David Madani, told WBP Online.
"Oil and gas extraction declined due to the non-conventional and also the conventional extraction. We’ve seen a big drop in current rig activity, which points to contractions to conventional oil."
Madani estimates that the economy shrank 0.3% in February, which is more than the analysts’ consensus predicts.
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