The Loonie is up by A LOT against its counterparts and it’s only the start of the week! What else is in store for the comdoll this week? Here’s a list:
IVEY PMI (Oct. 4, 2:00 pm GMT)
Last month’s release got mixed up with Canada’s jobs numbers, so the report didn’t really cause a lot of hoopla for the Loonie’s price action.
This month’s update could inspire more volatility as there are no other top-tier reports on tap during the trading session.
Analysts expect to see the closely-watched manufacturing index print at 62.3 in September, higher than the 61.9 reading in August.
A better-than-expected report could point to a strong jobs report scheduled a day later, so make sure you pay attention to the headline AND the details of the release!
Employment and trade data (Oct. 5, 12:30 pm GMT)
As if the U.S. NFP report isn’t exciting enough, Canada will also print not one, but TWO top-tier reports on the same day.
Market geeks see Canada printing a net of 24,700 added workers for the month of September, which would take out about half of the 51,600 decline we saw in August.
The unemployment rate is expected to stick to 6.0%. Ditto for the labor market participation rate, which is expected to remain at 65.3% for the month.
Canada’s trade numbers, on the other hand, is expected to worsen in August. Analysts see a 1.44B CAD deficit for the month, which is waaaay higher than the 0.11B CAD shortfall seen in July.
The pressure to do well trade-wise has somewhat eased after the NAFTA developments over the weekend, but that won’t stop some of the Loonie bears from attacking anyway.
But that brings me to my next point…
The biggest story of today’s Asian session trading is the Canada reportedly reaching a “framework deal” with the U.S. over the weekend.
While we have yet to see the details of the report, the Loonie has already jumped across the board at the prospect of Canada remaining in the NAFTA brotherhood and avoiding a direct trade war with the U.S.
Canadian officials have pinky-sworn to share the deets today, so make sure you’re glued to the tube to see if there’s meat in the deal or if we’ll see a “buy-the-rumor, sell-the-news” situation during the announcement!
Last Week’s Price Review
The Loonie is headed for its third week of net wins since the Loonie is currently the second top-performing currency of the week (as of 5:00 pm GMT).
The Loonie was taking directional cues from oil (as usual), but the Loonie didn’t really track oil prices too closely this week.
In fact, the Loonie clearly decoupled from oil during Wednesday’s U.S. session and on Thursday’s U.S. session.
So, what happened then? Well, the Loonie got whupped during Wednesday’s U.S. session, thanks to a report that the U.S. will publish the text of its trade deal with Mexico (but without Canada), perhaps as early as Friday.
And it didn’t help that U.S. Trade Representative Robert Lighthizer later said that the U.S. is read to “go ahead” with a Mexican deal and leave Canada behind, adding that “If Canada comes along now, that would be the best.”
The Loonie also got a bearish kick when Trump said the following during a news conference at the United Nations:
“I must be honest with you, we’re not getting along at all with [Canada’s] negotiators.”
“[Mr Trudeau’s] tariffs are too high and he doesn’t seem to want to move and I told him forget about it. And frankly we’re thinking about just taxing cars coming in from Canada.”
Trump also said that he rejected a request for a one-on-one interview with Trudeau, but Trump did say that a deal was not yet off the table, which is probably why there was no follow-through selling.
Anyhow, the Loonie would regain its mojo during Thursday’s U.S. session. And as I noted in Thursday’s U.S. session recap, that was due to the following comments from Canadian PM Trudeau (emphasis mine):
“The Americans are finding that the negotiations are tough because Canadians are tough negotiators, as we should be. But a good, fair deal is still very possible. We won’t sign a bad deal for Canadians.”
BOC Guv’nah Poloz’s speech also very likely helped to sustain the Loonie’s rise since Poloz said that:
“Today, we continue to judge that higher interest rates will be warranted to achieve our inflation target. And we know that if we move too slowly to raise interest rates, the economy could move firmly above its capacity limits and inflation could establish significant momentum. We certainly want to avoid this outcome.”
And as icing on the cake, Canada’s monthly GDP reading surprised to the upside on Friday (+0.2% vs. +0.1% expected), sending the Loonie even higher.