Slow Day in the Markets as Canadian Budget Watchdog Warns on Increasing Deficit
The forex market have been subdued at the start of the week. The Wednesday, November 11 Veterans day and Remembrance day holidays have effectively split the week in half. The USD/CAD is neutral at 1.3270 but has been caught in the 1.3250 to 1.3290 range with very little economic data to guide the pair.
In Canada the office of the Parliamentary Budget Officer (PBO) published a report that warns the nation is due to post higher deficits as growth will continue to be moderate. The PBO provides third party analysis to the Canadian government and is sticking to its forecast of 2 percent growth in 2016 and 2.3 percent in 2017 as global activity and lower oil prices will continue to be a concern to the commodity exporter.
The Canadian budget watchdog made sure to comment that the warnings do not take into consideration the campaign promises of the newly elected Liberal government. The report made its forecasts on the existing plans from the ousted Conservative government led Stephen Harper. Newly elected Prime Minister Justin Trudeau campaigned on a platform of stimulus and infrastructure spending which could see the deficit balloon even further.
Loonie Under Pressure After US NFP Crushes Expectations
The U.S. employment report released on Friday, November 6 put downward pressure on the Canadian dollar. The dependency on the energy sector has hurt the forecast for a quick recovery as the economy looks to offset the losses from lower oil prices. The American economy gave strong validation to the Federal Reserve to put the interest rate hike on the table once again, boosting the USD. The retail sales data on Friday is the next hurdle that the strength of the economy must clear in order to keep the hope alive that the Fed will finally act on their much-awaited policy decision.
Veterans and Remembrance Holiday, European and U.S. Data This Week
The CAD will trade with little Canadian data to support it as the next release on the agenda is the House price index on Thursday, November 12. The HPI is expected at 0.2 percent after last months 0.3 percent. Prices of dwellings are estimated to have cooled down from the surge during the summer. The warnings of the OECD and other institutions and seasonal factors point to a slowdown in house prices. The loonie will be reacting to oversees growth data out of Europe and the U.S. retail sales which could make or break the fate of the December rate hike by the Federal Reserve.
CAD events to watch this week:
Wednesday, November 11
12:30am CNY Industrial Production y/y
4:30am GBP Average Earnings Index 3m/y
4:30am GBP Claimant Count Change
5:30am GBP BOE Gov Carney Speaks
8:15am EUR ECB President Draghi Speaks
7:30pm AUD Employment Change
ALL DAY Veterans Day US and Canadian Remembrance Day Holiday
Thursday, November 12
8:30am USD Unemployment Claims
Friday, November 13
2:00am EUR German Prelim GDP q/q
8:30am USD Core Retail Sales m/m
8:30am USD PPI m/m
8:30am USD Retail Sales m/m
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