The USD/CAD depreciated as Asian markets started trading on Monday but the loonie lost some traction as Canadian housing starts were released with a 14 percent drop from September to October. New home construction came in at 198,065 in October, a fall from the impressive 231,304 seen in September. The housing indicator’s release coincided with comments form the Organization for Economic Co-operation and Development (OECD) which warned the new Liberal government to keep an eye on house prices. The loonie was put on the back foot at the USD/CAD is trading at 1.3274. The OECD is forecasting Canada to grow 1.2 percent in 2015 with a 2 percent and 2.3 growth in the following two years.
The U.S. employment report released on Friday, November 6 put downward pressure on the Canadian dollar. The dependency on the energy sector has hurt the forecast for a quick recovery as the economy looks to offset the losses from lower oil prices. The American economy gave strong validation to the Federal Reserve to put the interest rate hike on the table once again, boosting the USD. The retail sales data on Friday is the next hurdle that the strength of the economy must clear in order to keep the hope alive that the Fed will finally act on their much-awaited policy decision.
Keystone Pipeline Rejection Another Blow to Canadian Energy Sector
U.S. President Barrack Obama rejected the proposed Keystone XL pipeline between Canada and the U.S. on Friday after seven years of back and forth negotiations. The energy industry forecasts that by 2017 all existing pipelines will be overcapacity. Obama was not a fan of the oil sands crude and call it “dirtier crude oil”which in the end made the environment argument beat the economic one. The pipeline would have allowed Canada to diversify from the U.S. as the single consumer of Canadian crude. Reaching the gulf coast would have made shipping out to Europe and Latin America a question of logistics. Lower oil prices have reduced the appeal of more expensive ‘”dirty”oil and have put the economic growth of Canada in jeopardy.
Remembrance Holiday, European and U.S. Data This Week
The CAD will trade with little Canadian data to support it as the next release on the agenda is the House price index on Thursday, November 12. The HPI is expected at 0.2 percent after last months 0.3 percent. Prices of dwellings are estimated to have cooled down from the surge during the summer. The warnings of the OECD and other institutions and seasonal factors point to a slowdown in house prices. The loonie will be reacting to overseas growth data out of Europe and the U.S. retail sales which could make or break the fate of the December rate hike by the Federal Reserve.
Forex Market events to watch this week:
Monday, November 9
7:30pm AUD NAB Business Confidence
8:30pm CNY CPI y/y
Tuesday, November 10
3:00pm NZD RBNZ Financial Stability Report
3:05pm NZD RBNZ Gov Wheeler Speaks
Wednesday, November 11
12:30am CNY Industrial Production y/y
4:30am GBP Average Earnings Index 3m/y
4:30am GBP Claimant Count Change
5:30am GBP BOE Gov Carney Speaks
8:15am EUR ECB President Draghi Speaks
7:30pm AUD Employment Change
Thursday, November 12
8:30am USD Unemployment Claims
Friday, November 13
2:00am EUR German Prelim GDP q/q
8:30am USD Core Retail Sales m/m
8:30am USD PPI m/m
8:30am USD Retail Sales m/m
*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar