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Slew of US Data Thurs/Fri Could Weigh on Loonie

Published September 14, 2016
  • USDCAD is in the upper 1.31's this morning and looking ready for a proper test of its recent months long range high at 1.3255; a daily close above that level may be a harbinger of more USD strength with the potential to reach 1.35/1.36 before the market settles
  • This Thursday and Friday bring a number of key US economic releases, notably Retail Sales, Jobless Claims, CPI and Consumer Sentiment, amid a dearth of data from Canada which only reports Manufacturing Sales for July on Friday
  • In such a lopsided release schedule, the chances of an outsized currency-move on strong data are increased and thus risks for the Loonie are heightened
  • Oil prices have stabilized this morning and are trading at $44.83 after falling as much as 3% yesterday on a gloomy outlook from the IEA, who now sees the supply/demand imbalance stretching into mid 2017
  • The US Energy Information Administration releases official oil inventory data this morning and forecasts are for a 3.8M barrel build in crude stocks over the last week 
  • US and Canadian rate differentials (Chart 3) continue to trend in favour of the USD, as US 2 and 10 year yields are near their recent range highs despite the majority expecting the Fed to hold rates at next week's meeting
  • The BoC is likely hampered from hiking rates anytime soon given the feeble rate of jobs growth over the past 12 months; a mere 77k net positions have been added, all of which are part time
  • This keeps the focus on the Fed as the only G10 Central Bank actively entertaining rate hikes in the near future which in turn skews risk to the topside for US yields and USDCAD

Charts: (1) USDCAD formed a base near 1.2825. (2) Fed interest rate hike probability. (3) US-CA 2YR Yield Spread. (4) Economic Calendar.