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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.

Overlay of CAD Pairs: 1-Hour Forex Chart
Overlay of CAD Pairs: 1-Hour Forex Chart
CAD Weekly Performance from MarketMilk
CAD Weekly Performance from MarketMilk

Canadian Headlines and Economic data

Monday:

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 trend in Canadian housing starts was 239,052 units in December 2020, up from 236,334 units in November 2020

“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.”

Tuesday:

Canadian Manufacturing sales decreased for the first time in three months, declining 0.6% to $53.7 billion in November.

Canadian Wholesale sales grew for the seventh consecutive month in November—up 0.7% to an all-time high of $67.4 billion.

Wednesday:

Trudeau ‘looking forward’ to working with Biden, ‘making sure’ he hears Keystone XL views

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.

Canadian inflation slowed to +0.7% m/m in December; core inflation slowed to 1.57% m/m

Bank of Canada governor Macklem speaks after rate decision

“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.”

Thursday:

Little fear of rate hikes despite expected economic surge: Bank of Canada

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.

BOC Gov Macklem: Canadian economy has enough stimulus for now

Friday:

Retail sales rose at their fastest pace since September, up 1.3% to $55.2 billion in November.

“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.