Week In FX Americas – Loonies Takes A Brief Flight

Canada released two conflicting data points at the same time on Friday – retail sales and inflation. The loonie briefly gained support from only one release and that was the news that Canadian January inflation topped expectations with the all item CPI annual rise at +1.5% from the December’s print of +1.2%. Numbers like this should convince the market to quash any speculation, at least temporarily, that the BoC might be forced by the persistent threat of “disinflation” to ease o/n rates.

Aside from rate differentials, the CAD has remained under pressure outright this week mainly due to some M&A energy activity where copious amounts of the ‘greenback’ have been required to seal the deal. Not so good was the news that Canadian retail sales in December fell the most in 12-months – falling -1.8% to $40.19b. The market had been forecasting a -0.4% headline decline. Certainly not providing any extra support for the loonie was the previous monthly gain in November having to be revised down to +0.5%.

Even this year’s list of disappointing US economic reports is finding it difficult to overthrow the dollar; the bulls continue to stick to their view that current data will not alter the Fed’s economic outlook – all the bad is being blamed on the weather. The FOMC minutes this week focuses hard on the medium term outlook and with no deviation from Fed expectations should allow the ongoing of modest tapering.

WEEK AHEAD

* EUR Euro-Zone Consumer Price Index
* USD Consumer Confidence
* GBP Gross Domestic Product
* CHF Gross Domestic Product
* EUR German Unemployment
* EUR German Consumer Price Index
* USD Durable Goods Orders
* JPY National Consumer Price Index
* EUR Euro-Zone Consumer Price Index
* CAD Gross Domestic Product
* USD Gross Domestic Product
* CNY Manufacturing PMI

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell