The Canadian dollar depreciated on Tuesday versus its American counterpart. The monthly gross domestic product report published by Statistics Canada showed a 0.1 percent contraction in August. Declines in manufacturing, mining and the energy industry edged down the indicator despite rises in other sectors. The biggest red flag was the drop in manufacturing which contracted 1.0 percent. Manufacturing was down across the board with the biggest loses coming in chemical manufacturing.
Bank of Canada (BoC) Governor Stephen Poloz discussed the Monetary policy report (MPR) that was published last week before the Canadian Senate Banking Committee. The central bank chief reinstated his forecast of economic expansion at 3.1 percent in 2017 and 2.1 percent in 2018. The Governor focused on four factors of uncertainty: inflation, excess capacity, wage growth softness and high levels of household debt.
The speech in Ottawa was read as dovish with Governor Poloz admitting that: “the economy is likely to require less monetary stimulus over time, but we will be cautious in making future adjustments to our policy rate”.
The USD/CAD gained 0.46 percent on Tuesday. The currency pair is trading at 1.2892 after a disappointing contraction of Canadian gross domestic product (GDP) of 0.1 percent in August. The Canadian economy is facing a slowdown after an impressive first half. The July GDP reading was flat, and with a small forecasted gain of 0.1 that never materialized investors sold the loonie against the greenback.
The Bank of Canada (BoC) held rates unchanged last week at 1.00 percent. The central bank had already hiked twice in 2017. BoC Governor Stephen Poloz spoke in Ottawa today in front of the Senate Committee on Banking, Trade and Commerce. The policy maker outlined the crucial spot in the economy cycle the Canadian economy is facing. Poloz used the word “caution” when talking about future adjustment to the policy rate which has been read as the two rate hikes will be it for 2017.
Oil prices surged on Tuesday. The price of West Texas Intermediate is trading at $54.37 ahead of the weekly US crude inventories to be released by the Energy Information Administration (EIA) on Wednesday, November 1 at 10:30 am EDT. The supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers have pushed prices higher as there is talk of a further extension to achieve balance in the energy markets. The rise in prices could unleash a rise in US oil rigs that could offset the gains as more supply is added to the market. This has been the pattern in the market of the last couple of years.
Crude inventories in the US are expected to have fallen 1.5 million barrels last week. Iraqi supply is not to full speed as the government is routing some of the northern Kurdish field production through the south. OPEC members will meet again in Vienna on November 30 to discuss the plans for a supply cut extension.
Market events to watch this week:
Wednesday, November 1
5:30 am GBP Manufacturing PMI
8:15 am USD ADP Non-Farm Employment Change
10:00 am USD ISM Manufacturing PMI
10:30 am USD Crude Oil Inventories
2:00 pm USD FOMC Statement
2:00 pm USD Federal Funds Rate
8:30 pm AUD Trade Balance
Thursday, November 2
5:30 am GBP Construction PMI
8:00 am GBP BOE Inflation Report
8:00 am GBP MPC Official Bank Rate Votes
8:00 am GBP Monetary Policy Summary
8:00 am GBP Official Bank Rate
8:30 am GBP BOE Gov Carney Speaks
8:30 am USD Unemployment Claims
8:30pm AUD Retail Sales m/m
Friday, November 3
5:30 am GBP Services PMI
8:30 am CAD Employment Change
8:30 am CAD Trade Balance
8:30 am CAD Unemployment Rate
8:30 am USD Average Hourly Earnings m/m
8:30 am USD Non-Farm Employment Change
8:30 am USD Unemployment Rate
10:00 am USD ISM Non-Manufacturing PMI
