Countercurrency movements and positive market sentiment put the Loonie on top last week. Can this week’s catalysts extend the comdoll’s gains?
CPI reports (Feb 27, 1:30 pm GMT)
Consumer prices in Canada shot up by 2.0% from a year ago in December, as higher food and phone services prices offset losses from lower gasoline prices.
Analysts had expected another 1.7% annualized gain after October’s 1.7% uptick.
The surprisingly strong report boosted the Loonie across its trading counterparts.
This week, analysts expect to see a 0.2% monthly increase in the headline consumer prices, higher than the 0.1% decrease we saw in December. Ditto for the annualized reading, which is estimated to print at 1.5% from December’s 2.0% reading.
Since Bank of Canada (BOC) Governor Poloz recently talked about how the central bank’s rate hike path is “highly uncertain” and that he and his team remain data-dependent, you can bet your pips that other traders will also be closely watching this release.
Monthly GDP (Mar 1, 1:30 pm GMT)
Lower output from the energy industry as well as weaker petroleum and coal production dragged on Canada’s economy in November. The monthly reading showed a 0.1% contraction, which is weaker than the 0.3% uptick seen in October and lines up with the 0.1% decline we saw in September.
On Friday market geeks expect to see a 0.0% growth for the month of December, while Q4 2018’s numbers are expected to come in at 1.3% from Q3’s 2.0% increase. What you need to keep your eyes on, however, is the annualized reading that will show the country’s growth for 2018.
Remember that the BOC expects an annualized growth of 1.3% in Q4 2018 and 0.8% in Q1 2019 before it gains steam on the back of stronger job creation and business spending.
If this week’s numbers disappoint, then the BOC might just hold on to their current rates for longer than markets are expecting.
Overall risk sentiment
As we’ve seen last week, high-yielding bets like crude oil and the Loonie were some of the benefactors of optimism over the U.S.-China trade negotiations.
The talks continue this week with Donald Trump extending the March 1 trade truce deadline to a yet-to-be-announced date. Bullish pressure from Saudi Arabia’s more-than-expected production cuts, and the U.S.’ sanctions on Venezuela and Iran are also expected to continue over the next couple of days.
Keep close tabs on other market themes (like Brexit), however, as they could also influence overall risk appetite in the markets.
Missed last week’s price action? Read CAD’s price recap for February 18 – 22!