USDCAD news - page 42
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CAD: Look For USD/CAD To Hit 1.35 Before 2016 Comes To A Close
The recent uptick in Canada’s international goods trade balance has helped paint a brighter picture of third quarter growth. But, much of that recovery is coming from a resumption of oil exports after the Alberta wildfires. Even after stripping out the effects of both the fires and weak oil prices, Canada’s current account deficit as a percentage of GDP remains wide. It appears that the world is not enough for Canadian trade as weak global demand post-crisis continues to restrain non-energy exports.
Looking ahead, with the Fed aiming to hike rates before year-end, demand for the portfolio flows financing Canada’s current account deficit could wane, showing up in the form of a weaker loonie.
Look for CAD to hit 1.35 before 2016 comes to a close.
read more
September 2016 Canadian housing starts 220.6k vs 190.0k exp
September 2016 Canadian housing starts
Prior 182.7k. Revised to 184.2kCAD: A Heavy Weak Ahead For CAD: Fade USD/CAD Strength Into 1.33
CAD Event risk: A heavy week led by CPI, retail sales and a BoC meeting, a fresh Monetary Policy Report on tap too.
Dep. Gov. Wilkins delivered a very dovish speech 6 Oct. It is possibly an easing signal though we think recently stronger data (trade, IVEY, jobs, building permits, monthly GDP) will ultimately see the arguments in favour of “patience” win out one more time. That saidthe BoC is likely to maintain their less upbeat narrative next week (Wed, Oct 19) and repeats, “the risks to the inflation outlook have tilted somewhat to the downside”.
CAD should be a relative outperformer amid USD strength. Trudeau’s fiscal stimulus kicks in more forcefully in Q4 and oil prices have meaningfully outperformed both iron ore and dairy, flagging risks of a deeper decline in AUD/CAD and NZD/CAD.
Fade strength in USD/CAD toward 1.33, though hard to see it sustainably below 1.30 at least until the Dec Fed hike is fully priced in and out of the way.
source
Canada August existing home sales +0.8% vs -3.1% expected
Canadian home sales data from the Canadian Real Estate Association
USD/CAD forecast for the week of October 17, 2016
The USD/CAD pair fell initially during the course of the week, but we still have plenty of support below, especially down at the 1.30 level. A supportive candle would be reason enough to go long, but I also believe that at this point in time we will more than likely find a supportive candle on shorter-term charts and therefore the volatility will have to be dealt with by anybody wanting to go long. Keep in mind that oil markets have quite a bit of influence on the Canadian dollar itself, see you will have to watch them as well.
USD/CAD Weekly Forecast October 17-21
The Loonie was the top performer and one of only two currencies that posted gains against the Greenback in the past week. USD/CAD declined as correlations with oil price strengthened following a period of divergence.
WTI crude oil (USOIL) prices posted a fourth consecutive week of gains, with a weekly close above the $50.00 price point for the first time this year.
The correlation between USD/CAD and oil prices had been diverging shortly after the OPEC announcement on September 28 but correlations strengthened this past week with USD/CAD even declining at some points while oil price fell lower.
A clear technical break was seen last week, suggesting USD/CAD may correct lower in the upcoming week despite a break higher in the US Dollar. On a 4-hour chart, the currency pair fell through a confluence of support this week as a rising trendline from September 22 and the 200 DMA were seen within close proximity of a horizontal level at 1.3188. Following the support confluence break, the pair broke to fresh lows for the week, setting a succession of lower lows and lower highs from the October 7 peak.
The US Dollar index (DXY) posted a second consecutive week of gains, and has broke to seven-month highs this past week. Momentum in the rally remains strong, with the index closing the week out near highs.
Positioning in the Loonie was marginally changed in the week to October 11. The COT report indicated a decline of $185 million in the net short held among non-commercials, bringing the net short to $882 million.
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CAD: Here Is Why To Stay Short The Loonie Even As Oil Creeps Higher
If crude oil’s slide was the nail in the coffin for a strong Canadian dollar, why isn’t the loonie rising from the dead as oil stages a comeback? Because it’s a rally for the wrong reasons, of insufficient magnitude, and its role in weakening the exchange rate has been overstated in the first place.
Oil’s rally is a story about a pending supply cut by OPEC, not a signal of accelerating demand. Had it been a demand-pull story, we would historically have seen other cyclical commodities on the mend, but that’s not generally the case. The Bank of Canada’s exenergy commodity price index, weighted to the country’s activity in the resource space, remains moribund (Chart). Canada’s export basket does not live by oil alone, and the weakness in prices for such commodities as copper, potash and uranium, for example, are signposts that global markets aren’t yet in great shape. Their softness will still be weighing on Canada’s nominal trade balance, one of the drivers for the currency.
The oil rally also isn’t nearly enough to get now-delayed mega-projects back on the drawing board. Rig counts in Canada have bottomed, but they’re also turning higher stateside, with a US shale oil return representing a wall of supply that will keep higher cost oil sands projects off the table for a few years to come.
Oil can’t bear all the blame, because even when we flirted with triple digit WTI prices in 2011-13, Canada was running a large trade and current account deficit. Instead, most of the drop in the Canadian dollar was an overdue correction from an overvalued level attained after the Bank of Canada went solo with rate hikes in 2010.
Much of what the Bank of Canada will say in the week ahead should already be priced in. Governor Poloz is unlikely to cut rates immediately, and the market should already have taken note of hints of a downgrade in the BoC’s medium term growth forecast.
But if there’s any reaction in the currency, it will be a modest weakening. The OIS futures market has not priced in any chance of an ease in the quarters ahead. While our base case also has a flat path for Canadian overnight rates, don’t be surprised if the market prices in some chance of a cut in the months ahead. New mortgage rules should reduce the BoC’s fear that a rate cut would fuel a more worrisome housing bubble, and might raise concerns of that a slowing in homebuilding will eat into growth.
Look for a dovish tone in the Bank’s message to at least open the door a crack to a rate cut if necessary, a contrast to a more hawkish Fed. That’s reason enough to stay short the loonie even as oil creeps higher.
CIBC targets USD/CAD ta 1.35 by the end of the year.
source
Canadian August manufacturing sales +0.9% vs +0.3% expected
Canada August factory data
Bank of Canada holds rates at 0.50% as expected
Bank of Canada decision October 19 2016 highlights
In the September statement, the BOC said "risks to the profile for inflation have tilted somewhat to the downside since July."
Full text of the Bank of Canada decision Oct 19, 2016
Bank of Canada maintains overnight rate target at 1/2 per cent
The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.
The global economy is expected to regain momentum in the second half of this year and through 2017 and 2018. After a weak first half, the US economy in particular is strengthening: solid consumption is being underpinned by strong employment growth and robust consumer confidence. However, because of elevated uncertainty, US business investment is on a lower track than expected.
Looking through the choppiness of recent data, the profile for growth in Canada is now lower than projected in July's Monetary Policy Report (MPR). This is due in large part to slower near-term housing resale activity and a lower trajectory for exports. The federal government's new measures to promote stability in Canada's housing market are likely to restrain residential investment while dampening household vulnerabilities. Recent export data are improving but are not strong enough to make up for ground lost during the first half of 2016, despite the effects of the Canadian dollar's past depreciation. Growth in exports over 2017 and 2018 are projected to be slower than previously forecast, due to lower estimates of global demand, a composition of US growth that appears less favourable to Canadian exports, and ongoing competitiveness challenges for Canadian firms.
After incorporating these weaker elements, Canada's economy is still expected to grow at a rate above potential starting in the second half of 2016, supported by accommodative monetary and financial conditions and federal fiscal measures. As the economy continues to adjust to the oil price shock, investment in the energy sector appears to be bottoming out. Non-resource activity is growing solidly, particularly in the services sector. Household spending continues to rise, along with employment and incomes outside of energy-intensive regions. The Bank expects Canada's real GDP to grow by 1.1 per cent in 2016 and about 2 per cent in both 2017 and 2018. This projection implies that the economy returns to full capacity around mid-2018, materially later than the Bank had anticipated in July.
Measures of core inflation remain close to 2 per cent as the effects of past exchange rate depreciation and excess capacity continue to offset each other. Total CPI inflation is tracking slightly below expectations because of temporary weakness in prices for gasoline, food, and telecommunications. The Bank expects total CPI inflation to be close to 2 per cent from early 2017 onwards, when these temporary factors will have dissipated, but downward pressure on inflation will continue while economic slack persists.
Given the downward revision to the growth profile and the later closing of the output gap, the Bank considers the risks around its updated inflation outlook to be roughly balanced, albeit in a context of heightened uncertainty. Meanwhile, the new housing measures should mitigate risks to the financial system over time. At present, the Bank's Governing Council judges that the overall balance of risks is still in the zone for which the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 1/2 per cent.