Weaker Data this Week may Help BOC with Decision
Joe Perry September 20, 2019 12:19 PM
With the recent data, lower rates may be ahead for Canada.
On Wednesday this week, Canada released its inflation data for the month of August. Although the MoM data was inline with expectations at -0.1%, the YoY headline number came in at 1.9% vs 2.0% expected. In addition, the Core Inflation Rate (YoY) came in at 1.9% vs 2.2% expected! Today, retail sales data was released for July. MoM the headline number was weaker at 0.4% vs 0.6% expected. However, even more concerning, is that the Retail Sales Ex-Auto MoM for July came in at -0.1% vs 0.3% expected. It is worth nothing that June’s number was revised from 0.9% down to 0.5%, which could account for today’s big miss, however that just means that the data was slowing even earlier the July!
In the Bank of Canada’s statement from their September 4th meeting, Central Bank Governor Stephen Poloz stated that “the current degree of monetary policy stimulus remains appropriate”. Note that at this meeting the Bank did not present their projections for inflation and growth. However, the projections will be presented at the October 30th meeting (these projections are done four times a year). At the September 4th meeting, the BOC left rates unchanged at 1.75% as expected.
October 30th is still a long way off, and we will see CPI data and Retail Sales data again during October. The Bank also must now grapple with how to handle the effect volatile oil prices may play into their decision, as well as the possible vote on the USMCA. But one must begin to consider that with the recent data, lower rates may be ahead for Canada.
USD/CAD is currently coiling in a long-term triangle extending all the way back to the beginning of 2016, as seen on a weekly time frame.
Source: Tradingview, FOREX.com
On a daily timeframe, USD/CAD traded lower off the shooting star on September 3rd and has held the 61.8% retracement from the July 13th low to the September 3rd high. The pair is currently trading below horizontal support from the low on September 2nd at 1.3270. The more important areas to watch are the trendlines of the previously mentioned long-term triangle, which are 1.3500 resistance and 1.3100 support.
Source: Tradingview, FOREX.com
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.