USDCAD news - page 16
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5 things we learned from the Bank of Canada decision
1)
The Bank of Canada is downright dour or economic growth. The 2015 growth forecast was lowered to 1.1% from 1.9% and the 2016 forecast to 2.3% from 2.5%. The consensus estimates are 1.5% and 2.1%, respectively. It's rare for a central bank to be more bearish than economists.
2)
There's no promise of further moves or monetary policy. Poloz said the BOC believes it will "unnecessary" to take more action in September or further out in the future. He left a caveat that the situation could change along with the data or if oil prices fall, he also said today's decision wasn't close so there is little resistance to another move if needed.
3)
They were wrong about oil. They anticipated a bigger bounce in oil prices and thought oil companies would continue to invest in the oil sands. Instead, companies will cut investment by 40% this year rather than the 30% the BOC anticipated.
4)
The weaker Canadian dollar didn't bring the kind of boost Poloz expected. He said he was 'quite surprised' that non-energy exports failed to improve. That's a particular blow to Poloz because he came to the BOC from Export Development Canada and should have extensive contacts among export firms.
5)
The toolkit is flush. Poloz said rate cuts, forward guidance and quantitative easing are options if the economy struggles. That kind of talk can send USD/CAD to stratospheric levels.
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USD/CAD: Loonie Slips Further After Wednesday’s Turbulence, Inflation Eyed
The USD/CAD pair reached higher on Thursday, sitting comfortably at the C$1.29 level, trading near 2009 lows.
The so-called loonie ticked down 0.26% to C$1.2946 against the greenback, after hitting the intraday low of C$1.2949 earlier in the session.
Traders were not caught off guard by the Bank of Canada's (BoC) decision this time around, which saw the key interest rate cut by another 25 basis points on Wednesday.
"The move after the BoC rate cut was not totally surprising given the fact that the market was to some degree expecting it. The market was divided 50/50 [prior to the decision]. The move to sell CAD was a given after the rate cut and Poloz’s comments, which were dovish," managing director of foreign exchange at National Bank Financial, Jack Spitz, told WBP Online.
However, the Canadian dollar is not any worse off than other commodity-based currencies, Spitz noted.
"The Canadian dollar is weak, but it is not necessarily weaker than other commodity currencies. When compared to the Australian dollar or New Zealand dollar, it is effectively running at the same level of weakness against the US dollar," he said. "To a certain degree Poloz is not targeting currency, but it is a byproduct of dovish monetary policy. If you contrast that with possible US Fed rate cuts, naturally you will get a weaker currency."
Spitz added that the next psychological level being targeted is C$1.30, "with the CAD trading near multi-year highs of fall 2008 and spring of 2009 — highs that were traded amid a financial debacle."
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Canada June CPI +1.0% y/y vs +1.0% y/y expected
Canadian June CPI highlights:
A touch strong on the core but it's basically a rounding error. There's nothing to change the outlook on the BOC here but it might damped expectations for another move in September.
USD/CAD initially ticked lower on the headlines but it reversed on broad USD demand on solid housing starts.
It's an instructive lesson in how sticky inflation is that Canadian inflation is only slightly higher than the US, despite a nearly 30% divergence in their respective currencies in the past year. Eventually, the weak loonie will boost Canadian prices but it will be slow and never match the 30% FX move.
USD/CAD Forecast July 20-24
The Canadian dollar lost about 270 points, as USD/CAD pushed past the 1.30 line for the first time since March 2009. The pair closed at 1.270. This week’s highlights are Wholesale Sales and Core Retail Sales. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
The loonie took a big hit as the BOC surprised the markets and lowered the rates by a quarter-point to 0.50%. In the US, retail sales was dismal and consumer sentiment fell short, but this had little impact on the spectacular US dollar rally.
* All times are GMT.
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Canada May wholesale trade sales -1.0% vs 0.0% expected
Canadian wholesale sales numbers from StatsCan:
More bad news in Canadaland, although it's a second-tier release.
Motor vehicle sales fell 3.1% and were a big drag but it's not a surprise after some recent gains. The real disappointment is that sales in 'machinery, equipment and supplies' fell 1.8%. That's where you'd start to expect to see some investment from exporters, given the low Canadian dollar.
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USD/CAD: Proceed Cautiously; Where To Target From Here? - Deutsche Bank
How does the latest Bank of Canada's rate cut impact Deutsche Bank's year-end forecast for USD/CAD?
"The January cut caused USD/CAD to sail past our previous 1.25 end-15 forecast and we fortunately responded by pushing out our estimate...Although momentum is clearly a tailwind, this time we will sit tight on our USD/CAD forecast (for now) while we wait for the price action to settle," DB argues.
"Our USD/CAD forecasts are already firmly in PPP overshoot territory so it is wise to proceed cautiously," DB advises.
In line with this view, DB maintains its USD/CAD year-end target at 1.30.
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Canada's Retail Trade Sets New Record on Strong Gasoline, Auto Sales
Canadian retail trade jumped the most in three months, breaking the previous dollar record in total sales. However, the better-than-expected figure might not be enough to avoid a fifth negative monthly GDP reading.
Sales were up 1% at C$43 billion in May – a new record value – following a 0.1% decline the previous month, Statistics Canada said on Thursday. The data surpassed market consensus of a 0.6% increase.
At the same time, core retail trade, which excludes automobile and parts sales due to their tendency to be volatile, rose 0.9%, beating analysts' expectations of an '0.8% advance. Meanwhile, volumes were up only 0.4%, signaling that the rest of the increase was triggered by higher prices.
The strong numbers could help lift the struggling Canadian dollar out of its multi-year lows against the US peer. The so-called loonie began its latest downward trend after the Bank of Canada (BoC) cut its interest rate to 0.5% last week.
Gas and autos
Consumers bought more gasoline and cars in May, making the two categories top contributors to monthly gains. Gas stations' receipts were up 1.9%, rising the most since February; while sales at motor vehicles and parts dealers rose 1.3%, largely due to Canadians buying new cars.
Electronics also rebounded following a sharp drop in April, but the advance of 6.1% was not enough to totally offset the previous month's decline. Consumers also bought more food and stayed away from beer, wine and liquor stores.
Moreover, stores related to lodging continued to prosper amid a housing boom in Canada, with benefits posted in home furnishings shops, as well as building material and garden equipment and supplies retailers.
The biggest gains were recorded in Canada's most populated province of Ontario and the eastern province of Nova Scotia.
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USD/CAD forecast for the week of July 27, 2015
The USD/CAD pair initially fell during the course of the week, drifting lower and breaking the potential support at the 1.30 level. However, we turned back around to form a hammer, and it now looks like the markets ready to go higher. We think that the “floor” in this market is at the 1.28 handle. Ultimately, we believe that the oil markets are going to continue to fall, so this pair will continue to rise. We are buyers, and recognize that this is a longer-term “buy-and-hold” type of situation now.
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USD/CAD Forecast July 27-31
The Canadian dollar was almost unchanged last week, as USD/CAD closed slightly above the 1.30 line. This week’s highlight is GDP. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
US numbers enjoyed a good week, as New Home Sales jumped and unemployment claims dropped dramatically. Canadian data was mixed, as Wholesale Sales slipped, while Core Retail Sales posted a stronger gain than expected.
* All times are GMT.
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USD/CAD slides lower with Fed meeting in focus
The U.S. dollar slid lower against its Canadian counterpart on Monday, even after the release of strong U.S. durable goods data, as sentiment on the greenback remained fragile ahead of the Federal Reserve's monthly policy statement.
USD/CAD hit 1.2979 during early U.S. trade, the pair's lowest since July 23; the par subsequently consolidated at 1.3003, down 0.34%.
The pair was likely to find support at 1.2932, the low of July 22 and resistance at 1.3102, Friday's high and an 11-year high.
The U.S. Commerce Department reported on Monday that total durable goods orders increased by 3.4% last month, beating expectations for a gain of 3.0%. Orders for durable goods in May were revised to a drop of 2.1% from a previously reported decline of 2.2%.
Core durable goods orders, excluding volatile transportation items, inched up by 0.8% in June, topping forecasts for an increase of 0.5%. Core durable goods orders dipped 0.1% in May, whose figure was revised from previously reported flat reading.
Investors were turning their attention to Wednesday’s Fed statement to see if policymakers will give any indication on the timing of a rate hike.
On Friday, the Fed mistakenly published a staff projection pointing to a quarter point rate hike later this year.
The dollar has been boosted in recent weeks by mounting expectations that the U.S. central bank could raise rates as soon as September if the economy continues to improve as expected.
Meanwhile, the commodity-linked Canadian dollar continued to suffer from the oil market's ongoing downward trend. Crude oil futures for September delivery were down 1.39% to $47.47 in U.S. morning trade, the lowest level since January.
The loonie was lower against the euro, with EUR/CAD advancing 0.67% to 1.4427.
The single currency was boosted after the Ifo research institute said earlier that its business climate index rose to 108.0 from a reading of 107.5 in June, compared to expectations of 107.2.
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