USDCAD Declines Ahead of BoC Release
The CAD has benefitted from the appreciation in oil over the last few days. Moreover, yesterday's Ivey PMI beat forecast, printing at 61.2 (60.2). The Bank of Canada is due to release its December rate statement and overnight rate today at 3:00 pm GMT. This is likely to introduce volatility. Rates are expected to remain at 0.25%, with hikes expected by markets in March next year. This would be earlier than the BoC has previously communicated. Attention is also drawn to Canada's trade surplus. At CAD2.1bn, this is the largest surplus in close to a decade. Floods in British Columbia are like to affect next month's trade numbers, but there is little doubt that the Canadian economy has momentum behind it. Below, the USDCAD declines over the same period that USOil appreciates (blue boxes).
Past Performance: Past Performance is not an indicator of future results.
An argument may be made for hawkishness. Inflation is above 3%, and there is a growing acknowledgment that inflationary pressure is more entrenched than previously thought. Governor Macklem has acknowledged this persistence. The jobs data on Friday, 3 December, had a huge surprise to the upside, with 153.7K created jobs against the forecast of 36.5K. Unemployment also beat the consensus of 6.6%, coming in at 6%. A rate increase is unlikely, but the market may be disappointed if the BoC's tone does not have, at least, hints of hawkishness, omicron notwithstanding.
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
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