By FXEmpire.com
Introduction: The Canadian Dollar moves in reaction to the US Dollar. Movements are small and easy to track and trade. The Canadian Dollar also responds to economic reports within Canada. It has little action against foreign currencies except during major moves or crisis.
The USD/CAD is the single biggest beneficiary of rising oil prices. Canada which is already the biggest exporter of oil to the US will experience a boost to its economy when oil price continue to increase. Therefore, if oil rises the Canadian dollar is likely to follow. Over the past years, the correlation between the Canadian dollar and oil prices has been approximately 81%.
Weekly Analysis and Recommendation:
The USD/CAD ended the week close to the high at 1.0221. The Canadian dollar could not mount any defenses against the strength of the USD this week. Oil prices plummeted to a near record low for the year, weakening the Canadian economy, which is dependent upon exports of crude to the US. As shown in the chart below, the CAD lost 0.0236 or 1.97 of its value this week.
Since its strongest point on April 27th, CAD has lost 4.0%. The combination of rising risk aversion and uneven data from the US is weighing heavily on the currency. This week was thin on eco data, there is no US data of note, Canadian 2 year bond yields have dropped 12bpts since the end of April, while US 2-years have gained 4bpts.However, the expectations for BoC interest rate increases have not moved to the same degree. Currently, the OIS market is pricing in a 42% probability of an interest rate hike in Canada over the next 9months. Major Economic Events for the week of May 14-18 actual v. forecast for the Canadian & US Dollar
|
USD |
Core CPI (YoY) |
2.3% |
2.3% |
2.3% |
|
USD |
Core CPI (MoM) |
0.2% |
0.2% |
0.2% |
|
USD |
CPI (YoY) |
2.3% |
2.3% |
2.7% |
|
USD |
NY Empire State Manufacturing Index |
17.1 |
8.5 |
6.6 |
|
USD |
Core Retail Sales (MoM) |
0.1% |
0.2% |
0.8% |
|
USD |
CPI (MoM) |
0.0% |
0.1% |
0.3% |
|
USD |
Retail Sales (MoM) |
0.1% |
0.2% |
0.7% |
|
USD |
TIC Net Long-Term Transactions |
36.2B |
19.4B |
10.1B |
|
USD |
Housing Starts |
0.717M |
0.680M |
0.699M |
|
CAD |
Manufacturing Sales (MoM) |
1.90% |
1.00% |
-0.20% |
|
USD |
Building Permits |
0.715M |
0.730M |
0.769M |
|
USD |
Industrial Production (MoM) |
1.1% |
0.6% |
-0.6% |
|
USD |
Continuing Jobless Claims |
3265K |
3235K |
3247K |
|
CAD |
Wholesale Sales (MoM) |
0.4% |
0.4% |
1.5% |
|
CAD |
Foreign Securities Purchases |
-2.08B |
9.34B |
12.54B |
|
USD |
Initial Jobless Claims |
370K |
365K |
370K |
|
USD |
Philadelphia Fed Manufacturing Index |
-5.8 |
10.0 |
8.5 |
|
CAD |
CPI (YoY) |
2.0% |
2.0% |
1.9% |
|
CAD |
CPI (MoM) |
0.4% |
0.3% |
0.4% |
|
CAD |
Core CPI (MoM) |
0.4% |
0.3% |
0.3% |
Historical:
Highest: 1.0842 CAD on 01 Nov 2009.
Average: 1.0147 CAD over this period.
Lowest: 0.9435 CAD on 26 Jul 2011.
Economic Highlights of the coming week that affect the American and Canadian Markets.
|
May 22 |
14:00 |
USD |
Existing Home Sales |
4.48M |
|
May 23 |
12:30 |
CAD |
Core Retail Sales m/m |
0.5% |
|
12:30 |
CAD |
Retail Sales m/m |
-0.2% |
|
|
14:00 |
USD |
New Home Sales |
328K |
|
|
14:30 |
USD |
Crude Oil Inventories |
||
|
May 24 |
12:30 |
USD |
Core Durable Goods Orders m/m |
-0.8% |
|
12:30 |
USD |
Unemployment Claims |
||
|
12:30 |
USD |
Durable Goods Orders m/m |
-4.0% |
|
|
May 25 |
TBD |
ALL |
G8 Meetings |
|
|
13:55 |
USD |
Revised UoM Consumer Sentiment |
Originally posted here
