The Canadian dollar will end Wednesday trading nearly flat after having gained some traction early in the session only to give it back after the U.S. Federal Reserve kept rates unchanged in May. The American central bank kept the wording in their statement with a comment on the economic slowdown seen in the first quarter as transitory. While not necessarily dovish, it was very neutral on what policy makers intend to do next. The FOMC members voted unanimously to keep the benchmark rate in a 0.75 to 1 percent range. May was seen as a long shot given that Fed member comments have not put the market on alert ahead of a move unlike March and there was no press conference scheduled. June 14 is the next monetary policy meeting and expectations are high as the next rate hike depends on how transitory the current economic slowdown really is.
The drop in metal prices hit the Canadian stock market in a day with no local economic indicator releases. Tomorrow the publication of the trade balance at 8:30 am EDT with an improvement to the shock deficit last month. Later in the day Bank of Canada (BoC) Stephen Poloz will speak in Mexico City at the Canadian Chamber of Commerce. The Trump administration has put Canadian exports to the US in the spotlight ahead of a NAFTA renegotiation.
The USD/CAD lost 0.136 percent in the last 24 hours. The pair is trading at 1.3699 after the U.S. Federal Reserve kept rates unchanged and the loonie appreciated slightly ahead of Friday’s employment data in both nations. The Canadian currency has been caught in a perfect storm as oil prices have retreated, the economy has failed to regain traction and to make matters worse its biggest trading partner is threatening to tear up the pact that it depends on.
Housing market worries continue to gain traction as troubled mortgage lender Home Trust Capital’s liquidity issues put the real estate bubble to the forefront. The Bank of Canada (BoC) has issued multiple warnings about the housing bubble, but without hiking rates Canadians are going deeper into depth and keep boosting speculative prices even higher. The central bank was proactive in 2015, but is now very hands off as the government’s initiatives have been insufficient in the current macro climate.
Gold lost 1.417 percent on Wednesday. The price of the yellow metal is trading at $1,239.20. Gold has lost near 2.4 percent in the last week and is now trading near monthly lows. The U.S. Federal Reserve acted as expected at the end of the May Federal Open Market Committee (FOMC) meeting and held rates, but kept a June rate hike on the table putting downward pressure on gold. The US avoided a government shutdown reducing political risk in the US reducing investor appetite in the metal as a safe haven.
Market events to watch this week:
Wednesday, May 3
4:30am GBP Construction PMI
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Non-Manufacturing PMI
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Statement
USD Federal Funds Rate
9:30pm AUD Trade Balance
11:10pm AUD RBA Gov Lowe Speaks
Thursday, May 4
4:30am GBP Services PMI
8:30am CAD Trade Balance
USD Unemployment Claims
4:25pm CAD BOC Gov Poloz Speaks
9:30pm AUD RBA Monetary Policy Statement
11:00pm NZD Inflation Expectations q/q
Friday. May 5
8:30am CAD Employment Change
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change
