Following last week’s particularly concerning Canadian employment data, the odds of the Bank of Canada increasing interest rates fell further.
Then on Monday a measure of Canadian business outlook future sales declined, adding pressure to an already struggling ‘Loonie’. Economists hoping to see more positive Canadian data today were disappointed as domestic existing home sales plummeted by 1.8 per cent in December month-on-month after dipping by 0.1 per cent in November.
Non-seasonally adjusted actual sales were up 12.9 per cent on the year, although December 2012 was a particularly weak month.
Ongoing domestic weakness and Federal Reserve tapering speculation has kept the Canadian Dollar trading lower against the majority of its most traded rivals over the last couple of weeks.
With yesterday’s US retail sales coming in above estimates the CAD/USD pairing was close to a four-year low overnight and the ‘Loonie’ has extended declines today as the Bank of Canada’s policy meeting and rate decision draws near.
The central bank is scheduled to gather on the 22nd, and as chief economist David Watt noted; ‘People are starting to get the view the Bank of Canada is certainly not going to be raising rates, but might actually turn more dovish or even open the door to rate cuts. You’re getting to the sell-Canada kind of story.’
A surge in US mortgage applications and a far stronger than anticipated empire manufacturing reading helped the US Dollar consolidate gains early into North American trading.
Meanwhile, the Canadian Dollar experienced modest movement against the Pound before Bank of England Governor Mark Carney testified to Parliament regarding UK financial stability. The British asset was supported against the majority of its peers by the UK’s brightening economic outlook and the expectation that Friday’s retail sales data will show an increase in sales.
When asked about housing in the UK Carney compared the nation with his native Canada; ‘As you know I come from Canada. Roughly half as many people and roughly twice as many houses built. The demographics of Canada are slightly older. Space is not an issue in Canada, but that gives a sense of desired household formation. In areas where people want to live or have to live there isn’t that scale of [housingbuilding]’
While UK news will be largely responsible for GBP/CAD movement before the end of the week, investors will also be looking ahead to the tone adopted at next week’s BOC rate decision.
Canadian Dollar (CAD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Canadian Dollar,
,Pound Sterling,0.5593,
Canadian Dollar,,US Dollar,0.9137 ,
Canadian Dollar,,Euro,0.6735 ,
Canadian Dollar,,Australian Dollar,1.0251 ,
Canadian Dollar,,New Zealand Dollar,1.0877 ,
US Dollar,,Canadian Dollar ,1.0945 ,
Pound Sterling,,Canadian Dollar,1.7876 ,
Euro,,Canadian Dollar,1.4880 ,
Australian Dollar,,Canadian Dollar,0.9755 ,
New Zealand Dollar,,Canadian Dollar,0.9152 ,
[/table]
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