North American Wrap: All About Canada

All About Canada

The North American trading session was destined to be more Canada-centric today than most days thanks to the economic release of Retail Sales and the monetary policy decision by the Bank of Canada, but the day became even more about Canada as Ottawa is experiencing a tragedy that we’ve become all too familiar with lately, a public shooting.  Before we get to the grisly part of this conversation though, let’s discuss what happened in the economy.

The Canadian day didn’t start out on the right path to begin with as Retail Sales fell 0.3% on expectations of a 0.1% gain.  Granted, this was data that is a little stale having been from August, but the fall is disconcerting nonetheless.  The Core version of the release didn’t fare any better by matching the 0.3% decline, but its expectation was even higher at a 0.2% gain.  In response, the USD/CAD shot up to 1.1290 from 1.1220, but was also helped along by decent US CPI which was mostly in-line with expectations.

The planned big news of the day for Canada was supposed to be the meeting of the BoC who took the stage shortly after Retail Sales hit the wire.  While they didn’t rock the boat by leaving interest rates unchanged at 1%, a move that was widely anticipated, they did a little rocking with their statement.  In the statement they mentioned the continued recovery of the US economy (particularly in sectors that are beneficial to Canada’s export prospects), weaker global growth prospects than they had envisioned in July, and a housing, autos, and consumer spending markets that are showing “renewed vigour” fueled by low borrowing rates.

The last bit about “low borrowing rates” may have been a hint that they aren’t planning on cutting rates any time soon if this current financial stigma continues to play out, and they spelled that out even more in their monetary policy report.  They specifically mentioned Ontario, Alberta, and British Columbia as regions of the country that are experiencing “household imbalances” that could increase further with a continued low rate environment.  Considering the strong housing market and “renewed vigour” in auto sales and consumer spending, the BoC may be more inclined to raise rates than cut them.  In response, the USD/CAD reversed its entire post-Retail Sales move and fell through the 1.12 handle before retracing some of that move after the press conference was canceled due to the events in the next paragraph.

Now on to the unfortunate news…right around the time that the BoC was announcing their decision to the world, a gunman shot a soldier at the nation’s war memorial near the parliament building in Ottawa.  The Canadian Forces soldier perished soon after, and there were reports of a total of three gunmen around the parliamentary area with one attacker firing shots in the parliament building before being gunned down.  The situation is ongoing as I go to press, but this harrowing experience is hardening the Canadian government’s attitude toward terrorism.

This incident comes on the heels of a separate incident in Montreal two days ago where a “radicalized” man ran down a couple of soldiers in his car, one of whom was killed.  At this point, no one knows if the current situation has anything to do with the first, or the fact that Canada is helping the US coalition to fight the Islamic State, but the lines connecting them are already being penciled in by Canadian officials who would like to strengthen the nation’s intelligence agency.  If fear continues to pervade in Canada, the CAD may not be able to hold on to the gains earned after the BoC meeting.

Looking Forward

The Asian trading session may have a few market moving events set up for us this evening as New Zealand CPI, Japanese Flash Manufacturing PMI, and Chinese HSBC Flash Manufacturing PMI are released.  Now that the low Chinese GDP figure has been released, China watchers will be keeping a close eye on the nation to see if a further slowdown is imminent.  The HSBC Manufacturing PMI is toeing the line of boom/bust as it has been barely above the 50 level over the last couple months, and a fall below that line could trigger a risk off event.