The Canadian dollar is higher on Thursday after the Bank of England (BoE) held rates unchanged earlier in the day. The USD is lower across the board as a lower risk aversion environment has given investors the green light to seek trading opportunities in emerging markets and commodities. Oil has risen 1.6 percent and has supported the rise of the loonie.
The Canadian New House Price index rose above expectations to 0.7 percent in May. As previously mentioned by Governor Poloz of the Bank of Canada (BoC) the big drivers are the cities of Toronto and Vancouver. Housing costs has risen as lower rates have been mortgages more affordable and one of the biggest reasons the central bank is not as eager to cut interest rates. The BoC is favours waiting for the impact of the government’s fiscal stimulus that was announced in March. Poloz mentioned yesterday during the BoC press conference that the positive effects should be felt in the second half of the year.
The softness in the USD despite the biggest gain in 12 months in Producers Price Index (PPI) and a lower than expected number of unemployment claims also gave a leg up for energy prices. West Texas rose 1.6 percent despite multiple concerns about oversupply as global demand for energy has not picked up despite the Organization of the Petroleum Exporting Countries (OPEC) forecasts.
The USD/CAD lost 0.568 percent in the last 24 hours. The pair is trading at 1.2919 a day after the Bank of Canada (BoC) held rates unchanged and delivered a surprisingly less dovish language when referring to the economy despite downgrading its growth forecasts. The central bank cut its growth expectations for the Canadian economy in 2016 down to 1.3 percent from a previous 1.7 percent.
The Monetary Policy Report published quarterly by the central bank also gave an assessment of the detrimental impact of the Alberta wildfires. The disaster eroded 1.1 percent of the Q2 growth taking with it the forecasted growth and turning it into a contraction.
The Canadian currency was boosted by the less dovish outlook as Governor Poloz continued his optimism about a second half rebound. Lack of economic data on Thursday and a risk on signal sent by the Bank of England (BoE) have appreciated the CAD versus the USD.
The West Texas gained 1.667 percent in the last 24 hours. The pair is trading at $45.43 despite the Energy Information Administration (EIA) reporting a higher than expected natural gas inventory buildup of 64 billion last week.
CAD traders will finish the week waiting for the release of manufacturing sales data. Last month the indicator beat forecasts with a better than expected 1.0 percent gain. Given the developments in the past two months the forecast call for a lower gain. The manufacturing data is a leading indicator of how much producers have been hit by changing market conditions. Elsewhere the U.S. will release two major indicators in the retail sales and inflation monthly changes put forth by the Bureau of Labor Statistics.
CAD events to watch this week:
Friday, July 15
8:30am CAD Manufacturing Sales m/m
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar