By FXEmpire.com
Outlook and Recommendation
The USD/CAD ended the month at 0.9895. The Looney had a rather busy month.
The Canadian economy is expected to experience moderate economic growth averaging just over 2% in 2012. While recent economic reports point to some loss in underlying domestic momentum, the late winter/early spring slowdown reflects in part temporary factors, including mine shutdowns and unseasonable weather. Improving US consumer and manufacturing activity is supporting a revival in industrial production and exports. In particular, stronger-than-expected North American vehicle sales have prompted several automakers to raise their production schedules. Nonetheless, the persistent strength of the Canadian dollar combined with the subdued pace of growth in the US – still the destination of over 70% of Canada’s international shipments – will remain significant hurdles to a faster export recovery. Business investment surveys continue to signal strong capital investment intentions in the year ahead, supported by heightened competitive pressures, solid corporate balance sheets and favorable financing conditions. Outlays are focused primarily on reducing costs and boosting productivity, as opposed to expanding capacity. Prices of many key commodities remain at profitable levels and are attracting sizeable long-term investments in the resource sector. In contrast, consumers, faced with slowing job gains and repeated warnings over high household debt levels, have become more cautious spenders. Consumer confidence weakened in April, driven lower by concern over job prospects.
The Canadian dollar broke out of its tight 210 point three-month range at the end of April. The sudden surge of strength came on the back of the Bank of Canada’s shift from neutral to hawkish, while the Federal Reserve maintained its dovish stance. The outlook for CAD is that it closes 2012 at stronger levels than it closed 2011 and that it closes 2013 at stronger levels still. The pace of appreciation is likely to be tempered by repeated spikes in risk aversion. It is worth noting that as global central banks have maintained loose and alternative policies, market volatility has dropped to multiyear lows. The headlines give the impression that there is tremendous global risk, but for now the markets are not pricing it this way.
Central Bank Name: Bank of Canada
Date of next meeting or last meeting: Jun 05
Current Rate: 1.00 % (+ 0.25)
Statement highlights of last meeting: the Bank has decided to maintain the target for the overnight rate at 1 per cent. In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 per cent inflation target over the medium term. The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.
Economic events for the month of May affecting CAD and USD
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Tuesday, May 01 |
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10:00 |
USD |
ISM Manufacturing Index |
54.8 |
53.0 |
53.4 |
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Wednesday, May 02 |
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08:15 |
USD |
ADP Nonfarm Employment Change |
177K |
209K |
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Thursday, May 03 |
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08:30 |
USD |
Initial Jobless Claims |
380K |
388K |
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Friday, May 04 |
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08:30 |
USD |
Nonfarm Payrolls |
170K |
120K |
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08:30 |
USD |
Unemployment Rate |
8.2% |
8.2% |
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10:00 |
CAD |
Ivey PMI |
61.0 |
63.5 |
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Thursday, May 10 |
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08:30 |
CAD |
Trade Balance |
0.3B |
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Friday, May 18 |
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08:30 |
CAD |
Core CPI (MoM) |
0.3% |
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Click here a current USD/CAD Chart.
Originally posted here
