Canadian Dollar Trading Sideways, Canadian Manufacturing Sales Next

 | Apr 17, 2018 08:07AM ET

The Canadian dollar has started the week quietly. Currently, USD/CAD is trading at 1.2550, down 0.14% on the day. In economic news, the US releases key consumer sales reports. Retail Sales are expected to improve to 0.4%, after two straight declines. Core Retail Sales is forecast to remain unchanged at 0.2%. On Tuesday, the US releases Building Permits and Housing Starts.

The Bank of Canada will be in focus on Wednesday, with the release of the new benchmark rate. The markets are expecting the bank to stay on the sidelines and hold rates at 1.25 percent. A quarter-point rate hike is expected in the near future, most likely in May or June. The BoC has overestimated the country’s growth, as the economy has fallen well short of the bank’s forecast of 2.5% expansion in the fourth quarter of 2017 and the first quarter of 2018. In actuality, GDP expanded 1.7% in Q4 and is expected between 1.5% – 2.0% in the first quarter. The NAFTA trade agreement remains a primary concern, as Canadian negotiators hope they can nail a new agreement with an unpredictable US administration.

Syria remains a geopolitical hot spot, after a US-led missile strike destroyed three chemical weapons sites on the weekend. Predictably, Syria and Russia strongly condemned the attack, with Russian President Putin warning that the attack would lead to global “chaos”. Still, a Russian response is unlikely, despite the strong rhetoric. Investors did not show much reaction to the attack, as the markets had already priced in a strike. After the weekend attack, President Trump declaration of “mission accomplished” means that things will remain relatively quiet in Syria. However, further chemical attacks by the Syrian regime could trigger a response from the US and its allies, which could result in volatility in the markets, similar to what occurred last week. If tensions are reignited, traders can expect minor currencies like the Canadian dollar could head lower.

USD/CAD Fundamentals

Tuesday (April 17)

  • 8:30 Canadian Foreign Securities Purchases. Estimate 7.24B
  • 8:30 Canadian Manufacturing Sales. Estimate 1.0%
  • 8:30 US Building Permits. Estimate 1.33M
  • 8:30 US Housing Starts. Estimate 1.27M
  • 9:15 US Capacity Utilization Rate. Estimate 77.9%
  • 9:15 US FOMC Member John Williams Speaks
  • 9:15 US Industrial Production. Estimate 0.3%
  • 10:00 US FOMC Member Randal Quarles Speaks
  • 17:40 US FOMC Rafael Bostic Speaks

Wednesday (April 18)

  • 10:00 BoC Monetary Policy Report
  • 10:0o BoC Rate Statement
  • 10:00 BoC Overnight Rate. Estimate 1.25%
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*All release times are GMT

*Key events are in bold

USD/CAD for Tuesday, April 17, 2018