Canadian Releases Surprise Higher While USD/CAD May Retrace Recent Move
Morning releases in two key Canadian indicators showed significant upside gains which validate the rising S&P/TSX index and recent currency rally seen in the Canadian dollar. The S&P/TSX Composite Index began the year at just under 9,000 and went as low as 7479.96 before rallying off March lows to nearly 10,000. The index posted a large rise early in the week and may continue to race towards possible resistance at 10,230. Elsewhere, the Canadian dollar has rallied from its triple bottom low with USDCAD in a clear downtrend since early March as equity markets rallied off their lows and commodities showed signs of stability. Oil has rallied above $55 per barrel to the highest level since late November while other commodities including Copper and Iron have also seen sharp increases in price as demand picks up in China and India. Despite the clear strength in raw material exporting nations, the Canadian dollar's advance has been losing steam in the past few sessions and buying on the recent dip has been recommended by DailyFX Technical Analyst Joel Kruger in a recent update on the pair. Despite a possible retrace, the Canadian dollar is expected to continue to strengthen in a broader time frame.
Canadian Building Permits in March posted a sharp gain of 23.5%, far above the Bloomberg consensus for a rise of 2.3%. The move follows declines in the past five months and a large drop of 15.8% in February. Dwelling deeper into the release, residential permits rose 5.0% for the first gain in more than eight months while non-residential permits showed a gain of 47.9%. The annualized change also narrowed to a decline of 18.7%, the smallest contraction since the financial crisis escalated in September. Despite the improvement, total permits in notional value remain below December’s value of C$4.647 billion and came in at C$4.543 billion.
The IVEY Purchasing Manager Index posted at 53.7 in April for the first rise in six months as the Canadian economy shows signs of recovery as commodities stabilize and companies expect demand in the US to improve in the second half of the year. The figure came in sharp contrast to the Bloomberg consensus estimate for a fall from 43.2 to 40.8. Looking deeper into the release, prices came in above 50 for the second month signalling a rise while inventories continued its recent declines despite a rise in the previous month. Employment declined from 46.0 to 43.8 signalling further job cuts to come as the figure remains in contraction for the eighth month.