While economic data and record high oil prices of over $78 a barrel should have been enough to boost the Canadian currency, the Bank of Canadas decision to remain neutral diminished CAD appeal, allowing the USD/CAD to reach as high as 1.1398. Amidst a hectic commodities market and turbulent geopolitical situation, the few releases due out next week may have little impact on the Canadian dollar.
Following last weeks rate-centric trading, the CAD should have more to go on fundamentally this week. On Monday, international securities transactions are expected to rise C$3.0 billion in May, following Aprils surge of C$3.9 billion as foreigners sold bonds and money market instruments to buy stocks. New motor vehicle sales, anticipated to fall 1.0% in May, will also be released on Monday. A decline would mark the second one in a row, as consumers remain hesitant to purchase automobiles in such a high gasoline price environment. Wednesdays release of the leading indicators index is predicted to rise 0.2% in June from Mays 0.3% increase, as a result of a relatively weaker stock market component. CPI data, due out on Friday, should be the only other market mover. The annual headline consumer price index should hold steady at 2.8% in June, however, annual core CPI is anticipated to rise marginally in June to 2.1% from 2.0% in May. A higher reading should bode well for the CAD, as it could indicate that the Bank if Canada could refrain from becoming too dovish on monetary policy.
While there were few economic indicators to warrant a stellar week for the Canadian dollar, traders were simply unwilling to look past the Bank of Canadas decision to hold rates steady at 4.25% following seven straight increases. This bearish sentiment is perhaps due to the wording in the central banks statement, which included, the current level of the target for the overnight rate is judged at this time to be consistent with achieving the inflation target over the medium term, drawing speculation that the end of the rate hike cycle by the BoC has come to a close. Factors that the central bank is sure to have considered include recent reports showing the first drop in employment this year and a narrowing trade surplus, indicating that the world's eighth-largest economy may be cooling. Canadian housing data were contradictory to the idea of a slowdown, however, as housing starts beat expectations and came in at 232.2K in June from an upwardly revised 222.2K in May. New housing prices also indicated expansion as the figure beat expectations of 0.7% by rising 1.3% in May, up from 1.2% in April. International merchandise trade missed the estimated figure of C$4.5 billion in May by C$0.4 billion, coming in at C$4.1 billion, as exports fell to the lowest inn a year in May on dipping energy and lumber shipments. Likewise, manufacturing shipments in May disappointed, coming in at 0.3% versus the expected 0.7%. Overall, the picture of economic health is blurred at best, but next weeks releases may give some clarification.
