Week In FX Americas – Do CAD Bears Get Their Chance?

  • Loonie Bears dominate intraday trading
  • Bulls squandered yesterday’s weak retail sales

As expected, Canadian inflation in April rose +2.0% (highest level in two-years) on Friday, or the level that Governor Poloz at the BoC aims for when establishing rate policy.

On a month-over-month basis, both headline and core prices rose +0.3% and +0.2%, respectively.

Digging deeper, the gain was driven mostly by the volatile component, energy. Pump prices climbed +6.6%; natural gas costs rallied a whopping +26% and electricity +4.6%. Stripping out the energy effect, the core-CPI also happened to rise +1.4%.

Just like other Central Bank policy makers, the BoC will focus on the core print and explain away the year-over-year +2% headline as being temporary. Expect them to remain cautions about downside risks to inflation given tepid wage gains and signs of a weaker job market. Last months disappointing employment report lost -28.9k jobs, but kept the unemployment rate steady at +6.9%.

Inflation, or lack of it, remains a concern for G10 central bankers. Draghi and company at the ECB are currently eyeing unconventional measures to drive growth and spending in order to spark price increases and ward off deflation. On June 5th capital markets will get to see if the ECB will have the gumption to put into practice what they have been loudly preaching.

The USD/CAD bears now get their chance especially after the bulls squandered their opportunity after Thursday’s weaker Canadian retail sales print (-0.1% vs. +0.2%). The loonies steady posture after the CPI print remains consistent with the tight trading range as both the US and Europe head into a long weekend.

On tap for next week:

With the holiday shortened trading week the potential of weekend event risk (Ukraine, EU elections) seems to bolstering some bond buying and keeping currencies in their familiar tight trading ranges.

With respect to the US and Canada, next week is light on the data front. Consumer confidence and durable goods orders will start the US’s week on Tuesday followed by preliminary GDP, unemployment claims and pending home sales on Thursday. Canada is very light and has to wait a week until next Friday’s GDP release.

WEEK AHEAD

* EUR European Parliament election
* JPY Bank of Japan Policy Minutes
* EUR German Unemployment Rate
* CHF Gross Domestic Product
* USD Gross Domestic Product
* JPY National Consumer Price Index
* JPY Tokyo Consumer Price Index
* CAD Gross Domestic Product

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