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USD/CAD declines after U.S., Canadian jobs data
The U.S. dollar declined against its Canadian counterpart on Friday, as the greenback weakened broadly after data showed that the U.S. economy added less jobs than expected last month, while upbeat Canadian jobs data boosted the nation's currency.
USD/CAD hit 1.1330 during early U.S. trade, the pair's lowest since November 3; the pair subsequently consolidated at 1.1364, retreating 0.53%.
The pair was likely to find support at 1.1261, the low of November 3 and resistance at 1.1466, the high of November 5 and a five-year high.
The greenback came under pressure after the Department of Labor said the U.S. economy added 214,000 jobs last month, disappointing expectations for an increase of 231,000. The number of jobs added in September was revised to 256,000 from a previously estimated 248,000.
The report also showed that the U.S. unemployment rate ticked down to 5.8% in October from 5.9% in September. Analysts had expected the unemployment rate to remain unchanged last month.
Meanwhile, the loonie strengthened after Statistics Canada reported that the number of employed people rose by 43,100 last month, confounding expectations for a 5,000 decline, after an increase of 74,100 in September.
Canada's unemployment rate fell to 6.5% in October from 6.8% in September. Analysts had expected the unemployment rate to remain unchanged last month.
The loonie was higher against the euro, with EUR/CAD sliding 0.28% to 1.4097.
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USD/CAD Forecast November 10-14
The Canadian dollar broke above the 1.14 line but recovered and showed little change on the week. USD/CAD closed the week at 1.1326. This week’s key release is Manufacturing Sales. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
US Nonfarm Payrolls slipped to 214 thousand, well short of the estimate of 235 thousand. On a brighter note, the Unemployment Rate slipped to 5.8%, its lowest level in six years. Excellent Canadian employment numbers on Friday bolstered the Canadian dollar, as Employment Change crushed the estimate and the Unemployment Rate dropped sharply.
* All times are GMT.
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USD/CAD Forecast Nov. 17-21
The Canadian dollar posted modest gains last week, as USD/CAD closed the week at 1.1286. This week’s highlights are Wholesale Sales and Core CPI. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
US employment numbers were not impressive this week, as jobless missed expectations and JOLTS softened. Still, there was a silver lining as the number of quits is back to pre-crisis levels, which shows that people are confident to switch jobs. Confidence is also apparent in the highest consumer confidence since 2007 and an improvement in retail sales. The Canadian dollar got a boost as Manufacturing Sales posted a strong gain.
* All times are GMT.
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Canada Posts Narrowest Current Account Deficit Since 2008
Canada’s current account deficit was the narrowest since 2008 in the third quarter as non-energy exports increased and deficits in investment and tourism declined.
The shortfall of C$8.40 billion (C$7.47 billion) from July to September, reported by Statistics Canada from Ottawa today, was narrower than all 13 estimates in a Bloomberg News survey, which had a median of C$11.2 billion. The agency also reduced its estimate of the second-quarter deficit to C$9.91 billion from C$11.9 billion.
Bank of Canada Governor Stephen Poloz has said sustained gains in exports and business investment must lead the economy back to full output over the next two years. Another reduction in the current-account deficit is unlikely because of the recent decline in the price of crude oil, says Avery Shenfeld, chief economist at CIBC World Markets in Toronto.
“Weaker oil prices could significantly dent the fourth quarter results,” Shenfeld wrote in a research note. Crude oil is one of Canada’s most important exports, and prices on the New York Mercantile Exchange have dropped 26 percent this year.
The surplus in traded goods widened to C$2.90 billion in the third quarter from C$2.33 billion the prior three months, Statistics Canada said. Exports of metal and non-metallic minerals rose C$1.3 billion and motor vehicle and parts shipments rose by C$400 million, more than offsetting a C$1.1 billion drop in energy exports as crude oil prices fell.
Canada’s dollar depreciated by 0.8 percent to C$1.1339 at 1:15 p.m. Toronto time, as oil prices fell to a four-year low after OPEC kept its oil production ceiling unchanged. Five-year federal government bond yields fell to 1.43 percent from 1.47 percent.
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USD/CAD weekly outlook: December 1 - 5
The Canadian dollar slumped to three-week lows against the U.S. dollar on Friday as a selloff in world oil prices overshadowed stronger-than-expected data on Canadian third quarter growth.
USD/CAD rose to highs of 1.1444, the most since November 7 and was last up 0.74% to 1.1414. For the week, the pair gained 1.64%.
The US dollar index, which measures the greenback against a basket of six major currencies, was up 0.45% to 88.41 late Friday, not far from the four-year highs of 88.52 set on Monday.
Oil prices tumbled on Friday following Thursday’s decision by the Organization of the Petroleum Exporting Countries to keep its production quotas unchanged, fuelling fears over a global supply glut.
The steep declines in oil prices overshadowed data Friday showing that Canada’s economy grew at a stronger rate than forecast in the last quarter, boosted by rising exports and increased consumer spending and business investment.
Statistics Canada reported that gross domestic product expanded at an annual rate of 2.8% in the third quarter, outstripping economists forecasts for growth of 2.1%.
Exports were up 2.2% and household spending rose 0.7%, while business investment in residential structures rose 3.0%, the fastest pace since the first quarter of 2012 the report said.
In the week ahead, investors will be focusing on the outcome of a policy meeting of the Bank of Canada on Wednesday, which is to be followed by jobs report for both the U.S. and Canada on Friday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Tuesday as there are no relevant events on this day.
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Canadian rate hike may be delayed by prolonged low oil prices – PIMCO
The fall in oil prices already has an impact on the value of the Canadian dollar, but can it also have an impact on the long term views of the Bank of Canada?
The team at PIMCO explains:
Here is their view, courtesy of eFXnews:
PIMCO’s head of Canadian portfolio management Ed Devlin told MNI Monday that while he currently expects the Bank of Canada to hike its policy rates in the second half of 2015, such a move could be delayed should oil prices remain low for a prolonged period of time.
When the central bank starts tightening will depend on oil prices and the pace of the economic recovery, and its action could be delayed until early 2016.
“If we experience a prolonged period of low oil prices, it will delay a rate hike by the BOC,” Devlin said.
While lower oil prices benefit the consumer, it takes a bite out of the country’s revenues.
“At the margin, falling oil prices are negative for economic growth in Canada,” Devlin said.
“That said, the current fall in general oil prices is somewhat offset by the drop in the discount that Canada sells its oil (the spread between Western Canadian Select and WTI/Brent has dropped more than $20),” he added. “This means that ‘tax cut’ to consumers in Central and Eastern Canada is greater than the drop in revenue experienced by Western producers.”
When PIMCO conducts its cyclical economic forum next week and revises GDP growth forecasts, “oil prices will be a prominent topic,” Devlin told MNI.
What the net effect of lower oil prices on economic growth and inflation will be, and how their decline will play out against other forces, global and domestic, also is a question that international organizations are looking at.
How it will ultimately impact the BOC’s response is a key question for Canada as oil prices remained on a downward path Monday.
The central bank will announce its next interest rate decision Wednesday, and is widely expected to maintain its overnight policy rate at 1.0%, where it has been since September 2010.
Analysts, however, will be looking at the policy statement for indications on whether the central bank acknowledges that prolonged low oil prices could impact the course of its policy, especially after the OPEC’s decision last Thursday to leave its production unchanged at 30 million barrels a day.
At the OECD, Chief Economist Catherine Mann told reporters last week that it would be “unlikely” for the BOC to “move in light of where oil prices are and the potential hit to the economy that will be associated with this period of low oil prices.
The OECD, which expects the Federal Reserve to start hiking its rates in mid-2015, estimates that whether Canada follows if the Fed hikes rates by 25 basis points, depends on where oil prices will be “at the time.”
At the International Monetary Fund, assumptions for oil prices will be revised down when the organization revisits its growth estimates for Canada. But the outcome might not necessarily be a lower GDP estimate.
A key reason is the importance of growth in the United States, Canada’s dominant trading partner, which was revised up in the third quarter, and which will weigh in the balance along with developments in emerging markets and Europe, IMF Mission Chief to Canada, Hamid Faruqee, said in a press briefing last week.
Canada’s GDP in the third quarter ALSO proved stronger than expected by economists, with an annualized pace of 2.8%.
In its WEO in October, the IMF projected 2.3% real GDP growth in Canada this year, accelerating to 2.4% in 2015.
The IMF’s forecasts echo those of the BOC, while the OECD is more optimistic for 2015, as it expects +2.6%, the same as the government’s assumption in the latest fiscal update.
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USD/CAD Forecast Dec. 8-12
The Canadian dollar showed strong gains early in the week but was unable to consolidate and ended the week almost unchanged. USD/CAD closed the week at 1.1423. This week’s highlight is Building Permits. Here is an outlook on the major market-movers and an updated technical analysis for USD/CAD.
In the US, Non-Farm Payrolls report was outstanding with a 321K job gain in November and finally a bump in wages. Canadian job data failed to keep pace, as Employment Change shed 10.7 thousand jobs, its first decline in three months. However, Ivey PMI was unexpectedly sharp, rising to 56.9 points.
* All times are GMT.
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Canadian dollar Hits 5-Yr Low Nears USD/CAD 1.15; More Weakness Eyed – Analysts
The collapse in the price of oil and also some not-so-impressing jobs data in Canada weighed on the Canadian dollar.
After USD/CAD got very close to 1.15, what’s next for the pair? Analysts weigh in:
Here is their view, courtesy of eFXnews:
The Canadian dollar fell to new five-and a half year low around C$1.1500 Tuesday, weighed by the recent slide in oil prices and overall commodity price weakness.
While subsequently the loonie has recovered modestly, analysts do not rule out further weakness in the sessions to come, especially if crude oil prices continue to decline.
Dollar-Canada was trading at C$1.1435 Tuesday afternoon, in the middle of a C$1.1398 to C$1.1501 range.
The earlier dollar-Canada high was the weakest loonie level since July 2009, when the pair topped out around C$1.1725.
“Yesterday’s daily close above C$1.1465 has reinforced the intermediate uptrend in USD/CAD,” and shifts the focus to the “channel top at C$1.1577 as the next resistance levels,” said George Davis, chief FIC technical analyst at RBC Capital Markets.
“Additional resistance is located above here at C$1.1622, followed by 61.8% Fibonacci retracement of the 2009-2011 decline at C$1.1667,” he said.
With the current uptrend in place, “valuation driven pullbacks” to C$1.1278 support and “the channel base at C$1.1198,” will likely attract buyers, he said.
RBCCM’s medium-term technical price target is C$1.1650, based on their long-held bullish view.
“While a daily close below C$1.1198 would cause us to shift to a more neutral outlook, we stress that a close below key long-term trendline support (dating back to 2012) at C$1.0851 is required to nullify the broader uptrend,” Davis said.
The 40%-plus decline in oil prices since June is a clear negative for both the loonie and Canadian stocks, said Doug Porter, chief economist and Robert Kavcic, senior economist at BMO Capital Markets.
“We have long maintained that for every $10 move in oil prices, the loonie makes a parallel move of about 3-5 cents; The currency has sagged about 7 cents since June, suggesting there’s potentially more weakness to come as oil prices have dropped around $40,” they said in a note.
Currently, the C$ is “mildly above fair value based on today’s commodity prices,” they said.
But, further crude weakness would likely lead to further Canadian dollar losses.
“Note that the parallel drop in the currency softens the blow from lower oil prices for both real growth (as it supports non-oil exports) and government finances (as revenues are driven by energy prices in C$ terms),” Porter and Kavcic said.
The Toronto Stock Exchange was off 0.27% at 14,106 in afternoon action, down from an earlier high of 14,153.41 and compared to the high of 15,175.36 seen November 21 and the 2014 high of 15,685.13, seen September 3.
A continued sell-off in crude will likely drag Canadian stocks lower, Porter and Kavcic said.
“This is mainly a composition story, with the energy sector weighing in at more than 20% of the index despite losing almost 30% of its market value in recent months,” they said.
In comparison, the U.S. energy sector makes up less than 10% of the S&P 500, Porter and Kavcic added.
There is event risk Wednesday, when the Bank of Canada is scheduled to release its semi-annual Financial System Review, followed by a press conference by BOC Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins.
Then Thursday, Governor Poloz will address the Economic Club of New York at 8:00 a.m. ET, with the text on the website at 7:45 a.m. ET. His topic is “The Future of Finance” and there will be Q&A.
On December 3, the BOC left the overnight target rate unchanged at 1.0%.
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USD/CAD forecast for the week of December 15, 2014
The USD/CAD pair initially fell during the course of the week, but then shot through the resistance at the 1.15 level in order to continue to show serious strength. With that, the market looks as if it’s ready to continue going on its next leg up, and that pullbacks should offer value in the US dollar. The 1.13 level should be massively supportive, so we do not believe that the market will fall below there. Ultimately, we believe that this market will then head to the 1.20 level given enough time.
USD/CAD trims losses after positive U.S. data
The U.S. dollar trimmed losses against its Canadian counterpart on Thursday, after data showed that U.S. jobless claims fell unexpectedly last week and as the Federal Reserve's latest policy statement also lent support.
USD/CAD pulled away from 1.1569, the session low, to hit 1.1618 during early U.S. trade, still down 0.09%.
The pair was likely to find support at 1.1545, the low of December 15 and resistance at 1.1676, the high of December 16 and a five-year high.
The greenback found support after the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending December 12 fell by 6,000 to 289,000 from the previous week’s revised total of 295,000. Economist had forecast an increase of 1,000.
At the conclusion of its monthly policy meeting on Wednesday, the Fed said it would be "patient" before raising rates, guidance which it said is consistent with earlier assurances statement that rates would stay low "for a considerable time."
The central bank acknowledged the improvement in the U.S. labor market and noted that the economy is making progress toward its goals in inflation and employment.
At the bank’s post policy meeting press conference Fed Chair Janet Yellen said the Fed was unlikely to raise rates for the "next couple of meetings" indicating that a move in April at the earliest is possible.
The loonie was higher against the euro, with EUR/CAD declining 0.59% to 1.4276.
Also Thursday, the Ifo Institute said its business climate index for Germany rose to 105.5 this mongh from a reading of 104.7 in November. Analysts had expected the index to tick up to 105.4 in December.
Later in the day, the U.S. was to release data on manufacturing activity in the Philadelphia region.
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