USD/CAD Canadian Dollar Sensitive to NAFTA Headlines

The Canadian dollar fell after US Trade Representative Lightizer said that time is running out with Canada on NAFTA talks. The US has pressured Canada to join the US-Mexico trade agreement but various deadlines have come and gone with no results.

The US wants to get this negotiation wrapped up as soon s possible to be able to present a trilateral deal to congress ahead of the mid-term elections.


usdcad Canadian dollar graph, September 25, 2018

Gaps remains between the two sides, with the most visible ones are access to the Canadian dairy market and the dispute resolution mechanism.

Elections in the province of Quebec, where a large number of dairy farmers are located, complicates matter as Canada realistically could not make big concessions until after the election.


West Texas Intermediate graph

The Canadian dollar is stuck in a tight range on Tuesday. Earlier in the session it was gaining on the US dollar, but the words from Lightizer put the loonie in a back foot, despite the rise in oil prices supporting the currency.

Canada: Wholesale trade, July 2018

Wholesale sales rose for the third time in five months, up 1.5% to $63.9 billion in July, more than offsetting the 0.9% decline in June. Sales were up in four of seven subsectors, representing approximately 66% of total wholesale sales.

The personal and household goods; food, beverage and tobacco; and motor vehicle and parts subsectors led the gains in July, while the miscellaneous subsector posted the largest decline.

In volume terms, wholesale sales increased 1.2%.

Increase in July attributable to higher sales in four of seven subsectors

The personal and household goods subsector rose for the second consecutive month, up 4.2% to $9.2 billion in July. Sales were up in five of six industries, led by the textile, clothing and footwear, and personal goods industries. In volume terms, sales in the subsector increased 4.6%.

Following two consecutive months of declines, sales in the food, beverage and tobacco subsector were up 2.6% to $12.0 billion, mainly on the strength of higher sales in the food industry (+2.4%). The gain in July was partly attributable to an increase in prices as sales in the industry were up 1.6% in volume terms.

Sales in the motor vehicle and parts subsector increased 2.4% to $11.1 billion, the first gain in four months. While increases were reported in all three industries, the motor vehicle industry (+2.0%) contributed the most to the overall gain in July.

Of the three subsectors posting declines in July, the miscellaneous subsector was the largest contributor, edging down 0.2% to $8.2 billion. Two of the subsector’s five industries declined in July, accounting for approximately 41% of the subsector’s sales.

Sales up in six provinces

Sales increased in six provinces in July, which together represented 97% of total wholesale sales in Canada. Quebec and Ontario accounted for most of the gain.

Sales in Quebec increased for the third time in four months, up 3.2% to $11.9 billion in July. Six of seven subsectors increased, led by the personal and household goods (+5.8%) and the food, beverage and tobacco (+5.0%) subsectors. Sales in the personal and household goods subsector increased after two consecutive declines, reaching their highest level on record, while sales in the food, beverage and tobacco subsector increased for the second consecutive month.

Wholesale sales in Ontario rose for the second month in a row, up 1.1% to $32.6 billion in July, on the strength of higher sales in four of seven subsectors. The motor vehicle and parts subsector (+3.1%), which rose after three consecutive monthly declines, and the personal and household goods subsector (+4.0%), which increased for the second consecutive month, contributed the most to higher sales in Ontario.

In Alberta, sales increased for the third time in five months, up 2.5% in July to $7.0 billion. The machinery, equipment and supplies subsector (+4.9%) contributed the most to the gain. The gain in this subsector was attributable to higher sales reported in the construction, forestry, mining and industrial machinery, equipment and supplies industry.

Sales in British Columbia rose 0.7% to $6.7 billion in July, on the strength of higher sales in the food, beverage and tobacco and the building material and supplies subsectors. Both subsectors increased following two consecutive monthly declines.

In dollar terms, the Atlantic provinces reported the largest decline in July. Sales in Newfoundland and Labrador decreased 4.6% to $354 million, on the strength of lower sales in the miscellaneous subsector.

The food, beverage and tobacco subsector contributed the most to the decline in Nova Scotia (-1.0%), New Brunswick (-0.8%) and Prince Edward Island (-0.8%).

Inventories rise in July

Wholesale inventories increased for the fifth time in seven months, up 1.4% to $87.1 billion in July. Gains were recorded in six of seven subsectors, representing 86% of total wholesale inventories.

In dollar terms, the personal and household goods subsector (+4.3%) recorded the largest gain, on the strength of higher inventories in five of six industries. This was the third consecutive monthly increase for the subsector.

Inventories in the building material and supplies subsector (+2.2%) grew for the fifth consecutive month in July. The increase was mostly attributable to gains in the electrical, plumbing, heating and air-conditioning equipment and supplies industry (+4.1%).

The food, beverage and tobacco subsector (+1.8%) posted a second consecutive monthly increase, mainly due to higher inventories in the food industry (+2.0%).

The machinery, equipment and supplies subsector (+0.6%) rose for the fifth time in seven months, on the strength of the farm, lawn and garden machinery and equipment industry (+1.5%).

The lone subsector to decline in July was motor vehicle and parts, down 0.8% following three consecutive monthly gains.

The inventory-to-sales ratio was unchanged at 1.36 in July. The ratio is a measure of the time in months required to exhaust inventories if sales were to remain at their current levels.

StatsCanada

Canada retail sales climb, inflation falls, CAD rallies

Canadian retail sales climbed in July following a decline in June, led by demand for food and higher gas prices.

Stats Canada said retail sales rose +0.3% in July to a seasonally adjusted C$50.9B.

Note: In June, retail sales fell by a revised -0.1%.

Ex-autos, July sales rose by a robust +0.9%, despite a decline of -2.2% at new car dealerships weighing on the overall results. However, on a price-adjusted basis, sales fell -0.1%. On a year-over-year basis, retail sales in July rose +3.7%.

Canada inflation slows in August

On the inflation front, it decelerated in Canada last month, but remained close to its seven-year high print from July. This headline print very much keeps the Bank of Canada (BoC) in play for another +25 bps hike in October.

Stats Canada said that CPI rose +2.8% y/y in August, following a +3.0% increase in July.

Digging deeper, core-inflation prices rose in a range from +2.0% to +2.2%, based on the three preferred gauges used by the BoC.

CAD initial reaction saw the loonie catch a bid, to deal at C$1.28864 a new weekly high.

NAFTA Deal Close But Doubts Remain OANDA Market Beat

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The USD/CAD gained 1.01 percent in the first week of September. The currency pair traded at 1.3173 on Friday after a tale of two reports put downward pressure on the loonie.

The Canadian and US jobs reports were published on Friday at the same time.

While the US economy added 201,000 and saw wage growth.


usdcad Canadian dollar graph, September 11, 2018

The Canadian economy lost 51,600 jobs in August and the unemployment rate rose to 6 percent.

The Canadian dollar was on the back foot most of the week given the uncertain future of the US-Canada trade negotiations.

The silver lining came on Thursday after Bank of Canada (BoC) Deputy Governor Carolyn Wilkins said that a breakdown in the US-Canada trade talks would not keep the central bank from raising interest rates.

Loonie hanging tough against the crosses, forget USD/CAD

CAD ‘bulls’ are looking to the crosses for some early week wins, especially GBP (£1.6766) and EUR (€1.4980) and will avoid the pain of the long dollar positions in this ‘risk off’ emerging market debacle.

Demand for the U.S dollar does not look like slowing down any time soon and with three-month U.S T-Bills at +2% certainly makes the ‘long’ dollar position the safe haven of choice.

From a technical perspective, the EUR now trading through the €1.1500 outright now looks more vulnerable, especially if the market begins to focus any further negative attention on Italy in respect to its exposure to Turkey and by the country’s 2019 budget process.

GBP/CAD has fallen to around £1.6767 from around £1.7037 since the Bank of England increased the interest rate to +0.75% on Aug. 2, mostly due to the fact that the market has switched their attention to Brexit uncertainties and the possibility of a no-deal scenario.

Canadian fundamentals support the loonie on any sell-off

After last Friday’s employment numbers where Canada added a net +54.1K jobs in July on a seasonally adjusted basis and an unemployment rate ticking down to +5.8% adds to the probability the Bank of Canada (BoC) will hike the benchmark interest rate one more time in 2018. Don’t expect the BoC to stray too far away from the Fed’s rate normalization plan.

So, look to the loonie to fly against contagion angst EUR or a no-Brexit deal pound. Even positive Nafta rhetoric will support the currency’s crusade!

USD/CAD plummets on Canadian jobs report

Canadian jobs market is on fire

By the numbers:

  • Canada Jul Net Jobs +54,100 From Jun
  • Canada Jul Net Jobs Forecast At +17,000
  • Canada Jul Full-Time Jobs -28,000; Part-Time +82,000
  • Canada Jul Jobless Rate 5.8%; Jun 6.0%
  • Canada Jul Jobless Rate Forecast At 5.9%
  • Canada Jul Avg Hourly Wages +3.2% From Year Ago
  • Canada Labor Force +19,100 In Jul From Jun
  • Canada Jul Participation Rate At 65.4% Vs 65.5% In Jun
  • Job creation flew by market expectations in July as large gains in part-time and public sector positions helped push down the unemployment rate by two-tenths.

    Canada added a net +54.1K jobs in July on a seasonally adjusted basis. The market was looking for a net gain of +17K.

    Canada’s new jobless rate fell to +5.8% in July, down from +6% in June. The market was looking for an unemployment rate of +5.9%.

    The loonie is off from its intraday low of C$1.3122 and currently trading C$1.3062 immediately after the release.

    Canada: New Housing Price Index, June 2018

    New home prices increased in June, marking the first upward movement since November 2017.

    New Housing Price Index, monthly change

    Nationally, new house prices edged up 0.1% in June, largely due to rising construction costs across the country. The cost of softwood lumber, which is widely used in residential construction, has been on the rise. According to the Industrial Product Price Index, the price of softwood lumber (except tongue and groove and other edge worked lumber) rose 34.3% year over year in June.

    Among the 11 surveyed census metropolitan areas (CMAs) reporting growth in June, the largest increases were in Montréal (+1.0%) and Ottawa (+0.7%). Builders in both markets linked the gains to rising construction and land development costs. Other notable rises occurred in St. Catharines–Niagara (+0.5%) and Greater Sudbury (+0.4%).

    In the west, prices for new homes were up in Calgary (+0.3%), Edmonton (+0.2%) and Vancouver (+0.2%). The increase in Vancouver follows five months of flat prices.

    Six CMAs reported declines in June, with Oshawa (-0.3%) registering the largest decrease.

    New home prices were unchanged in Toronto in June. Prices in this market have been flat or declining since November 2017.

    New Housing Price Index, 12-month change

    New house prices rose 0.8% year over year in June. The largest 12-month gains were in Ottawa (+5.0%) and London (+4.8%).

    Among the four CMAs reporting declines, Toronto (-1.3%) and Regina (-1.2%) recorded the largest 12-month decreases.

    StatsCanada

    Saudi Arabia sells off Canadian assets, loonie falls

    It’s being reported by FT that the Saudi’s are selling off Canadian assets in response to Ottawa’s criticism of the arrest of a female activist last week.

    Apparently, the Saudi central bank and state pension funds have been instructed to dispose of their Canadian equities, bonds and cash holdings.

    There is no Canadian dollar amount being proposed, but its believed that Saudi funds have in excess of +$100B invested in overseas markets. Canada’s proportion should be a small percentage.

    The loonie has been offered since yesterday, currently trading a tad shy of C$1.3100, down -0.3% at C$1.3082.

    Currently, markets have been looking at Canada’s recent economic strength and wondering if Bank of Canada (BoC) is on target to hike rates at next months policy meeting.

    Last weeks Canada’s GDP and Trade balance reports beat markets expectations and give CAD/USD a lift to C$1.2967 on Aug 3. Given Governor Poloz’s commitment to moving gradually and his concern over the economy’s sensitivity to rate rises, a September move is becoming more remote, especially without a signed Nafta deal.

    Canadian employment

    Friday’s Canadian employment numbers should have an impact, especially if we get another strong headline print – +18Ke vs. +31.5K for June. Many are also expecting the unemployment rate to improve a tad to +5.9% vs. +6%.

    Dollar Awaits Jobs Report Amid Trade Uncertainty

    The US dollar is higher against major pairs on Thursday in anticipation of a strong U.S. non farm payrolls (NFP). The U.S. Federal Reserve kept rates unchanged on Wednesday and without a press conference there was little guidance for the markets who will have to wait until the minutes from the Federal Open Market Committee (FOMC) meeting are published in two weeks. Two more rate hikes are forecasted to the Fed funds rate in 2018, but the economic indicators will have to validate them. The U.S. non farm payrolls (NFP) will be published on Friday, August 3 at 8:30 am EDT. Investors will be quick to scan the report for the wage growth and unemployment rate components.

    • US expected to add 190,000 jobs
    • US wages could have gained 0.3 percent
    • Unemployment rate in the US to drop to 3.9 percent

    Dollar Rises on Safe Haven Flows

    The EUR/USD lost 0.62 percent on Thursday. The single currency is trading at 1.1587 as the US dollar rose as investors sought a safe haven as trade tensions once again flared up between the United States and China.The Trump administration proposed a 25 percent tariff on $200 billion Chinese goods with China expected to retaliate.



    Friday’s economic data release will be highly focused on US indicators. The employment report by the Bureau of Labor Statistics will be the main attraction but geopolitics will continue to guide the market if trade war concerns do not subside.

    The US stock market closed with gains across the board, with the exception of the DJI. Apple became the first company to break above the $1 trillion capitalization. Not unlike Brexit negotiations it is still too early to say what effect the looming trade war between the US and China will have on markets as there is still the possibility that both sides will reach an agreement.

    US Commerce Secretary Wilbur Ross said on Thursday that the tariffs are thought through but a compromise is being worked on by the US President. NAFTA negotiations have advanced in recent weeks as the newly elected Mexican president has been optimistic a quick deal can be reached. Mexican Trade teams are in Washington to talk with the US Trade representative, but the US did not extend an invitation to Canada to join the meetings.

    Pound Lower Despite BoE Rate Hike

    The GBP/USD fell 0.84 percent on August 2. The pound is trading at 1.3015 after a Super Thursday that included a unanimous vote from the Monetary Policy Committee to raise the benchmark interest rate by 25 basis points. The decision to lift rates to 0.75 percent was heavily anticipated by the market. The currency rebounded temporarily on the announcement but quickly dropped as the press conference by BoE governor Mark Carney presented a gradual path in the future.



    Governor Carney told the BBC that a rate hike a year was a good rule of thumb but questions remain on the timing of the decision. The EU divorce concerns continue to hang over the UK as Prime Minister Theresa May has not been able to find the perfect compromise between hard and soft Brexit.

    The BoE elected to act now based on hard economic data than wait for the unclear outcome of the Brexit negotiations. The deadline is still 8 months away, but there is a lot of issues where not only are the UK and the EU apart, but there is no clear consensus between members of May’s cabinet.

    Loonie Falls Ahead of NFP and Trade Disputes

    The USD/CAD gained 0.13 percent in the last 24 hours. The currency pair is trading at 1.3026 after the US dollar rose and the loonie failed to get traction from a rebound in oil prices. West Texas Intermediate is trading at $69.54 ahead of US rig data due on Friday.


    usdcad Canadian dollar graph, August 2, 2018

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    The Bank of Canada (BoC) lifted interest rates by 25 basis points on July 11 and after a stronger than expected monthly GDP report the probability of a follow up in 2018 has risen. Bank of Nova Scotia is forecasting 2 more rate hikes despite the uncertain outcome on NAFTA. The BoC will try to keep the gap between the Fed funds rate and the Canadian rate as much as the economy will allow. The U.S. Federal Reserve is expected to hike in September and again in December to deliver the promised four interest rate hikes in their path to normalization.

    Market events to watch this week:

    Friday, August3
    4:30am GBP Services PMI
    8:30am USD Average Hourly Earnings m/m
    8:30am USD Non-Farm Employment Change
    8:30am USD Unemployment Rate
    10:00am USD ISM Non-Manufacturing PMI

    *All times EDT
    For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

    USD/CAD Loonie Higher on Strong Monthly GDP

    The Canadian dollar appreciated versus the US on Tuesday after the stronger than expected monthly GDP report. The Canadian economy expanded at a 0.5 percent rate in May versus the anticipated 0.3 percent. The higher annual pace of growth came in at 2.6 percent and has increased the possibility of another rate hike this year, appreciating the loonie versus the greenback on the North American trading session. Oil prices fell below $70 as the US dollar recovered with the announcement of new trade talks between the US and China.


    usdcad Canadian dollar graph, July 31, 2018

    The USD/CAD is flat after the strong Canadian data has been cancelled out by the announcement of lower trade tension between China and the United States. The currency pair touched a session low of 1.3010 at 8:30 am, but is now back at 1.3031 after sources indicated that US Treasury officials and China Vice Premier representatives intend to meet.

    The NAFTA and EU-US trade conversation both had positive sound bites this week. Incoming Mexican President was eager for a quick NAFTA renegotiation and he was echoed by the Trump administration. Canada and Mexico made sure to be clear that a trilateral negotiation is needed as the US has been pushing for two bilateral sit downs.

    Yesterday US Commerce Secretary Wilbur Ross said that NAFTA talks are close to a deal, specially with Mexico. The latest strategy by the US has been to move faster on talks with its southern neighbour with a new incoming government. Mexico and the US will hold ministerial talks on Thursday in Washington. Canadian officials tried to be part of the meeting but were rejected by the US.