New Retail Summer Hours! South Granville & Richmond Branches - Monday - Friday 9am-5pm; Saturdays 9:30am - 4:30pm | Downtown Monday - Friday 8:30am - 5pm.
×

VBCE Weekly Foreign Exchange Wrap Up for Dec 4 - 8, 2017

Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca

Broad CAD strength carried over from the strong jobs report from Friday, Dec. 1 taking USDCAD down to 1.2622, the lowest level in 5 weeks. The market was ready for a hawkish or optimistic Bank of Canada policy announcement on Wednesday morning given the strong trend in Canadian economic data. Recent data continued to surprise to the upside proving that the Canadian economy had weathered any headwinds caused by the two back to back rate hikes and a rapidly strengthening CAD over the July – Sept period. The BOC held rates at 1.00% accompanied by a neutral tone maintaining "caution" with regards to future interest rate hikes. The CAD gains were quickly reversed taking USDCAD back towards the 1.2870 level. On Friday, U.S. employment data was mixed with good headline readings but weak wage inflation. USDCAD dipped towards 1.2800 before rallying to test the 1.2870 level again, eventually closing the week at 1.2845.

Weekly Open

Low

High

Weekly Close

USDCAD

1.2680

1.2622

1.2880

1.2845

EURCAD

1.5090

1.4927

1.5172

1.5120

GBPCAD

1.7090

1.6925

1.7370

1.7195

JPYCAD

0.01131

0.01122

0.01142

0.01132

AUDCAD

0.9660

0.9585

0.9691

0.9650

Themes for the week:

*The USD & GBP lead while the CAD, AUD, and JPY lag

*USDCAD falls to 6 week lows before climbing back towards 5 month highs, GBPCAD near 6 month highs, AUDCAD tests 1.5 year low

*WTI crude oil unchanged near 2.5 year highs ($55.82 - $58.16 range)

*Australia retail sales: 0.5% (exp 0.3% / prev 0.1%)

*Australian RBA interest rate decision: 1.50% (exp 1.50% / prev 1.50%)

*Canada trade balance: -$1.47 billion (exp -$2.7 billion / prev -$3.36 billion)

*U.S. trade balance: -$48.70 billion (exp -$47.50 billion / prev -$44.90 billion)

*Australia GDP Q3 y/y: 2.8% (exp 3.0% / prev 1.8%)

*Bank of Canada interest rate decision: 1.00% (exp 1.00% / prev 1.00%)

*Japan GDP Q3 y/y: 2.5% (exp 1.5% / prev 1.4%)

*U.S. non-farm payrolls: 228,000 (exp 200,000 / prev 244,000)

*U.S. unemployment rate: 4.1% (exp 4.1% / prev 4.1%)

*U.S. average hourly earnings: 0.2% (exp 0.3% / prev -0.1%)

On Tap for Next week:


Tue Dec 12: GBP CPI y/y: exp 3.0% / prev 3.0%

Wed Dec 13: GBP unemployment rate: exp 4.2% / prev 4.3%

U.S. core CPI y/y: exp 1.8% / prev 1.8%

U.S. Fed interest rate decision: exp 1.50% / prev 1.25%

U.S. Fed statement and economic projections

Thur Dec 14: Australia net employment: exp 19,200 / prev 3,700

GBP retail sales m/m: exp 0.4% / prev 0.3%

Bank of England interest rate: exp 0.50% / prev. 0.50%

European Central Bank interest rate: exp 0% / prev 0%

U.S. core retail sales: exp 0.7% / prev 0.1%

Fri Dec 8: Canada manufacturing sales: exp. 0.8% / prev 0.5%

U.S. industrial production: exp 0.3% / prev 0.9%

Technically, USDCAD is neutral. After breaking below the November low early in the week, USDCAD looked poised for further downside given the significant down-move from 1.2908 to 1.2620 over the Nov. 30 - Dec.5 period. A less hawkish statement from the Bank of Canada led a drastic reversal over the rest of the week taking USDCAD up towards the 1.2870/80 resistance level. A sustained break below 1.2620 or above 1.2920 will be required for a change in trend.

Topside targets to consider: 1.2880, 1.2908, 1.2916, 1.2970

Downside targets to consider: 1.2810, 1.2670, 1.2620, 1.2550

USDCAD 2017/2018 Forecast

Bank

2017 Q4

2018 Q1

2018 Q2

2018 Q3

TDCanada Trust

1.25

1.24

1.23

1.24

National Bank

1.25

1.24

1.27

1.28

RBC

1.27

1.33

1.30

1.27

CIBC

1.28

1.33

1.30

1.32

BMO

1.2810

1.2990

1.3060

1.3050

Scotia Bank

1.28

1.28

1.27

1.26

2017 CAD Summary

2017Summary

2017Open

Low

High

2017 Last

USDCAD

1.3450

1.2060

1.3787

1.2870

EURCAD

1.4158

1.3788

1.5371

1.5110

GBPCAD

1.6590

1.5736

1.7849

1.7135

JPYCAD

0.01150

0.01091

0.01240

0.01133

AUDCAD

0.9708

0.9615

1.0343

0.9725

Sources: Reuters, Bloomberg, FXStreet, RBC Capital Markets, Bank of Canada, U.S. Federal Reserve, CNBC, Forexlive, CMEGroup, BNN

083e3d7a6b

Follow us




Follow us on Twitter @vbcefx


Disclaimer


The information and opinions contained herein are gathered from sources which are thought to be reliable but the reader should not assume that the information and opinions are official or final. VBCE makes no warranty concerning the accuracy of the information and opinions, and accepts no liability for the consequences of any actions taken on the basis of the information and opinions provided. The content is for general information only and does not constitute in anyway giving financial advice.