The BOC is scheduled to print its policies this week. Will the central bank break the Loonie’s winning streak?
BOC’s policy statement (April 18, 2:00 pm GMT)
As expected, the Bank of Canada (BOC) kept its interest rates unchanged at 1.25% in March. What traders didn’t expect was that Governor Poloz and his team would highlight the risks of protectionist policies as much as they did that month. In the end, the central bank concluded that:
“…some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target.”
Analysts aren’t expecting any changes again in April. However, keep your eyes peeled for remarks that might move the Loonie around. Specifically, look for more (or less) concern over Canada’s trade policies with its major trading partners *cough* U.S. *cough*.
Keep in mind that the BOC will also print its quarterly monetary policy report AND that there will be a presser an hour after the statement’s release.
Retail sales and CPI reports (April 20, 12:30 pm GMT)
Much like in the previous month, Canada will be printing its retail sales and CPI reports on the same day this week.
Both the monthly and annualized reading bested analysts’ estimates in February’s report, which gave the Loonie a last-minute kick near the end of the trading day.
Retail sales also clocked in better-than-expected readings, though they were mostly shrugged off in favor of pricing in the strong consumer price report.
This week market bees are buzzing of Canada printing a 0.4% CPI growth (2.3% annualized) for the month of March, while headline retail sales (0.1% vs. 0.3% previous) and core retail sales (0.0% vs. 0.9% previous) are expected to show weaker readings for the month.
There won’t be other top-tier reports scheduled during the reports’ releases, so unless there’s a bigger theme to price in, it’s likely that these data will move the Loonie’s price action across the board. Make sure you stick around when they’re published!
Oil price action
As seen below, the Loonie has taken cues from the rise in oil prices for most of last week. Specifically, it tracked oil price increases when it looked like the U.S. (and friends) were gonna make missiles rain in Syria.
But with Russia not making any immediate plans to retaliate and the Western leaders hinting that last weekend’s attack is “one off,” will oil prices continue to rise? More importantly, will it lead to profit-taking for the Loonie bulls?
Last Week’s Price Review
The Loonie is the one currency to rule them all yet again (as of 5:00 pm GMT). Wow! That means that the Loonie has been on a winning streak for four consecutive week now.
Looking at the overlay of CAD pairs and U.S. WTI oil above, it’s pretty clear that the Loonie was tracking the surge in oil prices this week.
As to why oil was on a tear this week, market analysts attributed that to a host of reasons, including heightened geopolitical tensions in the Middle East, statements from OPEC and the IEA that global oil supplies are supposedly dwindling, and the surge in Chinese oil imports, which is the second biggest ever on record.
Other than oil, the BOC also released its business outlook survey report on Monday. And that was positive overall, which apparently also helped to push the Loonie higher on Monday.
As a side note, oil continued to climb higher on Friday, but CAD pairs began to feel some bearish pressure.
There was no apparent reason for the Loonie’s slide. In fact, there was a positive NAFTA-related report about the U.S. supposedly compromising on its demand with regard to autos, which increases the chance that NAFTA negotiations will succeed.
However, one probable reason for the Loonie’s late dip is profit-taking. After all, another BOC statement is coming our way next week. And remember, the Loonie has already been a net winner for four straight weeks, so some profit-taking is to be expected.