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 closed out the week before the US holiday at 1.0293. Markets shifted based on position squaring, particularly as there is hope for a European solution and the European Redemption Fund comes back into the headlines. As the global growth outlook softens and the European crisis escalates, it becomes increasingly clear that the need for more than a band aid solution is rising and threatening global financial market stability. In this environment, equities are quiet
As the Euro-crisis escalates traders have rapidly pared their bets for interest rate hikes by the BoC. As the top chart details, at the end of April there was one hike fully priced in over the next 9-months; this has now fallen to just a 10% chance of a hike. Rising vol, dropping oil, increasing uncertainty on the global growth picture are all weighing heavily on Canadian interest rate expectations and CAD.
Canada Q1 GDP will be released on June 1, and markets are anticipating GDP growth of 2% with an increase of 0.4% in the monthly income-approach number. We think that Canadian consumers slowed down their shopping during Q1 2012. Retail sales data indicate that the contribution to growth from retail trade will be just about zero on the quarter — after retail sales grew at an annualized rate of 6.9% from Q3 2011 to Q4 2011. The pace of retail sales is the principal proxy that we use in order to estimate changes in consumption as measured in the ‘expenditure-approach’ GDP numbers which markets typically focus on. Slower consumption would allay concerns that Canadian consumers are ramping up their shopping, thereby posing a threat to the macro economy and necessitating ‘prudential’ action to defuse their binging. Rather, Canadian consumers have already binged, with Canada’s aggregate consumption having expanded post-2008 even as most of the developed world economies have retrenched. The question now is whether the slow-down will be gradual or abrupt. Aside from watching the consumption numbers, we’ll be looking to see the extent to which construction continues to drive growth. The other major issue is the contribution to growth from oil and gas extraction, which looked fairly weak through the first two months of 2012
FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.
Major Economic Events for the week of May 21-25 actual v. forecast for the Canadian & US Dollar
|
Currency |
Actual |
Forecast |
Previous |
|
|
USD |
Existing Home Sales |
4.62M |
4.62M |
4.47M |
|
CAD |
Core Retail Sales m/m |
0.1% |
0.5% |
0.4% |
|
CAD |
Retail Sales m/m |
0.4% |
0.4% |
-0.2% |
|
USD |
New Home Sales |
343K |
335K |
332K |
|
USD |
Crude Oil Inventories |
0.9M |
0.8M |
2.1M |
|
USD |
Core Durable Goods Orders m/m |
-0.6% |
1.1% |
-0.8% |
|
USD |
Unemployment Claims |
370K |
372K |
372K |
|
USD |
Durable Goods Orders m/m |
0.2% |
0.5% |
-3.7% |
|
USD |
Revised UoM Consumer |
79.3 |
77.7 |
77.8 |
Historical:
Highest: 1.0842 CAD on 01 Nov 2009.
Average: 1.0147 CAD over this period.
Lowest: 0.9407 CAD on 26 Jan 2011.
Economic Highlights of the coming week that affect the American and Canadian Markets.
|
Date |
Time |
Currency |
Previous |
|
|
May 28 |
Tentative |
USD |
||
|
May 29 |
13:00 |
USD |
-3.5% |
|
|
14:00 |
USD |
69.2 |
||
|
May 30 |
12:30 |
CAD |
-1.6% |
|
|
14:00 |
USD |
4.1% |
||
|
May 31 |
12:15 |
USD |
119K |
|
|
12:30 |
CAD |
-10.3B |
||
|
12:30 |
USD |
2.2% |
||
|
12:30 |
USD |
370K |
||
|
13:45 |
USD |
56.2 |
||
|
15:00 |
USD |
0.9M |
||
|
Jun 1 |
12:30 |
CAD |
-0.2% |
|
|
12:30 |
USD |
115K |
||
|
12:30 |
USD |
8.1% |
||
|
12:30 |
USD |
0.2% |
||
|
12:30 |
USD |
0.3% |
||
|
14:00 |
USD |
54.8 |
Click here a current USD/CAD Chart.
Originally posted here
