The Canadian dollar is rangebound at the beginning of the week as both the USD and commodities have had a slow start. Fed speakers have kept anticipation for an interest rate hike in December well stoked, but U.S. economic fundamentals have been mixed shifting the focus on inflation data to be released tomorrow.
The Canadian economic calendar is full. Today Foreign Security purchases rose to 12.74 billion. The inflow of foreign funds in Canada marks the eight straight month of positive net investment.
**The Bank of Canada will release its rate statement on Wednesday, October 19 at 8:30 am EDT **that is widely expected to remain unchanged at 0.50 percent. BoC Governor Stephen Poloz will have a busy day with a press conference after the rate statement at 11:15 am and he will testify before the Banking, Trade and Commerce committee at 4:15 pm.
The Canada-E.U. trade deal continues to face opposition that is for now illustrated by the protests from a region of southern Belgium. After the CETA (Canadian European Trade Agreement) complaints were rejected by the German court, the Belgian rejection becomes the next hurdle for the trade deal. Seeing as some as a dangerous template for the upcoming trade deals with the U.S. and U.K. European citizens don’t want to be seen as giving any ground which has hurt the Canadian trade deal chances as all members must sign and now Belgium cannot sign next week.
The USD/CAD lost 0.08 percent in the last 24 hours. The pair is trading at 1.3129 to start a busy week that will see the Bank of Canada (BoC) release a rate statement on Wednesday. The loonie lost the support from oil prices as crude retreated on Monday. The Canadian currency is now subject to the tone of the rhetoric from the Canadian central bank as it delivers its rate statement on Wednesday. There is little chance of a rate cut this week, but the BoC has turned more dovish as the fiscal stimulus from the Federal government has not had the expected positive impact and more will be needed. The central bank was proactive in 2015 with two rate cuts to leave the current benchmark interest rate at 0.50 percent but with limited runway and an impending U.S. rate hike the best strategy could be to stand pat.
West Texas lost 0.94 in the last 24 hours. The price of crude is trading at $49.70 as once again worries about an oversupplied global market offset the optimism that surround the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC deals that is still under discussion. The rise of alternative energy sources has put a timeline to when crude demand will go only down. The World Energy Council has put 2030 as the peak of petroleum consumption.
After a free fall in the two previous years the OPEC managed to find a way to keep prices stable. Communicating out in the open with other producers about a possible oil output freeze accomplished the unthinkable as major investment banks were forecasting $20 barrels of oil. Even the failure of those deals to live up to expectations like the implosion of the Doha agreement did little damage as disruptions to supply due to natural disaster or social unrest kept the price within a now acceptable range.
The market share grab strategy pushed by Saudi Arabia is now changing as there are few clear winners with heavy discounting hurting the largest producers more than their upstart competitors. The balancing act for OPEC is how to introduce a supply cut that benefits its members without bringing back their shale rig nemesis online.
Market events to watch this week:
Tuesday, October 18
4:30am GBP CPI y/y
8:30am CAD Manufacturing Sales m/m
10:00pm CNY GDP q/y
10:00pm CNY Industrial Production y/y
Wednesday, October 19
4:30am GBP Average Earnings Index 3m/y
4:30am GBP Claimant Count Change
8:30am USD Building Permits
10:00am CAD BOC Monetary Policy Report
11:15am CAD BOC Press Conference
8:30pm AUD Employment Change
Thursday, October 20
4:30am GBP Retail Sales m/m
8:30am USD Philly Fed Manufacturing Index
8:30am USD Unemployment Claims
Friday, October 21
8:30am CAD Core CPI m/m
8:30am CAD Core Retail Sales m/m
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar
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