It was 0-3 for the Loonie last week as it clocked in its third losing week. Let’s see if Canada’s top-tier releases change the tides for the comdoll!
Trade balance report (June 6, 12:30 pm GMT)
Canada’s trade deficit widened from an upwardly revised 2.9B CAD to 4.1B CAD in March as imports shot up by 6.0% while exports only inched 3.7% higher for the month.
Luckily for the bulls, traders were more focused on pricing in higher oil prices at the time.
This week analysts are looking for the deficit to tighten a bit to 3.20B CAD. Keep in mind, however, that last month’s downside surprise took a backseat to oil prices. Don’t bet the farm on strong moves if the Loonie is taking directional cues from another market theme!
IVEY PMI (June 6, 2:00 pm GMT)
As one of the more closely-watched Canadian data, the IVEY PMI tends to influence the Loonie’s intraday moves. This week market geeks are expecting the report to weaken from 71.5 to 69.7 in May.
BOC Governor Poloz’ speech (June 7, 3:15 pm GMT)
Bank of Canada (BOC) Governor Stephen Poloz is scheduled to give a Financial System review some time in the middle of the week.
Unless the head honcho shares a bombshell, though, it’s unlikely that we’ll see significant moves for the Loonie. After all, the BOC has just recently shared its policy biases and is unlikely to change its mind in less than a week.
Employment numbers (June 8, 12:30 pm GMT)
Capping off Canada’s data parade is its own version of the NFP report. A quick look around tells us that analysts see net job growth posting a 20,000 gain for May, which is an improvement from the 1,100 setback that we saw last month. Meanwhile, the unemployment rate and participation rate are expected to maintain last month’s figures.
Will Canada go in the way of the U.S. and post a stronger-than-expected jobs data? We’ll have to wait for the report to know. Too bad PM Trudeau isn’t as active on Twitter like Trump is!
Last Week’s Price Review
The Loonie is mixed but a net loser (as of 5:00 pm GMT), so the Loonie is apparently on track for a third week of net losses.
CAD pairs took some directional cues from oil prices. However, they didn’t really track oil prices that closely. Moreover, the Loonie’s price action was mixed and messy, especially on Monday and Tuesday, which implies that the Loonie was somewhat vulnerable to opposing currency price action.
Having noted that, the Loonie did have two very clear instances of uniform price action.
The first happened on Wednesday when the Loonie jumped higher across the board in the wake of the BOC statement. Sure, the BOC kept its policy rate steady at 1.25%. But as explained in Wednesday’s U.S. session recap, the BOC did a hawkish hold since the BOC had a rather positive assessment and outlook on the Canadian economy and changed its language on forward guidance to boot.
As for specifics, first note that the BOC had this to say during the April BOC statement (emphasis mine).
“Some progress has been made on the key issues being watched closely by Governing Council, particularly the dynamics of inflation and wage growth. This progress reinforces Governing Council’s view that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target.”
And this is what the BOC had to say during the May BOC statement (emphasis mine).
“Overall, developments since April further reinforce Governing Council’s view that higher interest rates will be warranted to keep inflation near target. Governing Council will take a gradual approach to policy adjustments, guided by incoming data.”
In other words, the Canadian economy is evolving within the BOC’s expectations or better. And since the BOC omitted the phrase “some monetary policy accommodation will still be needed,” the BOC is therefore heavily implying that if economic conditions continue to meet or beat the BOC’s expectations, then a rate hike will likely be warranted.
Anyhow, most market analysts are attributing the Loonie’s surge on the BOC statement. But as you can see in the overlay of CAD pairs and crude oil above, oil prices were also surging at the time, which may have also pushed the Loonie higher.
And according to market analysts, oil prices jumped because of a warning from Russia’s central bank that lower oil prices will be detrimental for Russia. Well, that’s what market analysts say anyway.
Moving on, the other instance of uniform Loonie price action is when the Loonie plunged hard on Thursday. Oil prices were down on that day, especially U.S. WTI crude oil. Market analysts were baffled by that, but they did suggest that U.S. WTI crude oil got hit rather hard because of the glut in U.S. oil supplies.
At any rate, the slump in oil prices likely dragged the Loonie lower. However, it’s also likely that the Loonie got hit by selling pressure because of Canada’s GDP report. Sure, the monthly reading managed to beat expectations (0.3% in March vs. 0.2% expected). But as noted in Thursday’s U.S. session recap, the quarterly reading failed to meet expectations (1.3% vs.1.8% expected)
The Loonie did eventually find support when oil prices started to recover. However, the Loonie’s price action later became more mixed when oil prices resumed their slide.