The Bank of Canada gave the Loonie a boost mid-week, but disappointing employment data from Canada was able to deflate bullish sentiment ahead of the weekend.
Canadian Headlines and Economic data
Biden to yank Keystone XL permit on first day of presidency – this speculation hit the markets and with little to no other headlines, was the likely driver for a broad move in risk sentiment towards negative. It was highly likely the driver for the Loonie’s move lower as the pipeline was expected to pump an additional 500K barrels of oil to the U.S.
“The standalone monthly SAAR of housing starts for all areas in Canada excluding Kelowna CMA decreased by 12.2% in December from November. The SAAR of urban starts decreased by 12.8% in December. Multiple urban starts decreased by 15.1% while single-detached urban starts decreased by 5.5%.
Rural starts were estimated at a seasonally adjusted annual rate of 22,373 units.”
Foreign investors acquired $11.8 billion of Canadian securities in November, largely purchases of federal government debt securities. – “As a result, international transactions in securities generated a net inflow of funds of $4.2 billion in the Canadian economy in November, following two months of net outflow of funds.”
Bank of Canada holds rates amid optimism for vaccine rebound – The optimism was a bit of a surprise to the markets and likely why the Loonie popped on the event.
“The risk is that we see a further appreciation in the Canadian dollar… If we see further appreciation, that will become more of a headwind. That does present some downward risk to our projections.”
“We also agreed that if the economy turned out to be substantially weaker than our outlook, we have tools, we have options to provide even more stimulus and we’re prepared to use them. Reducing the lower bound from its current level of 25 basis points to lower but still positive number is one of those options to provide additional monetary stimulus.”
ADP Canada National Employment Report: Employment in Canada Decreased by 28,800 Jobs in December 2020 – “The November total of jobs added was revised from 40,800 to -219,800.” This correlates with the shift in sentiment on the Loonie, so it was likely the driver for the broad shift lower.
“Core retail sales—which exclude gasoline stations and motor vehicle and parts dealers—rose 2.6% on higher sales at food and beverage (+5.9%) and general merchandise (+1.6%) stores, as well as building material and garden equipment and supplies dealers (+2.2%).
Wholesale trade: Early indicator, December 2020: The advance results for December indicate that wholesale sales fell 1.7%. The decrease reflected lower sales in the machinery, equipment and supplies; food, beverage, and tobacco; and miscellaneous subsectors.