The USD/CAD closed the week at 1.3128 with a gain of 1.21% as the greenback rallied and oil and gold prices weighed heavily on the commodity currency.
The USD/CAD closed the week at 1.3128 with a gain of 1.21% as the greenback rallied and oil and gold prices weighed heavily on the commodity currency. Confidence in prospects for the global economy has been dented following Brexit or Britain’s vote to leave the European Union, with a growing view that monetary policy is a fading force and many governments now need to borrow and spend, Reuters polls showed.
Broad worries about political risks are also on the rise everywhere and not restricted just to Brexit’s repercussions and a failed coup in Turkey. The US is entering a period of heightened uncertainty too, leading up to November elections.
The Conference Board of Canada downgraded its economic growth forecast for Canada this year to 1.4% from 1.6%, citing a significant deterioration in business investment and a weakening global economy. Wildfires in oil-rich Alberta, which forced energy-production shutdowns in May, are also partly to blame for the downgraded view, the Ottawa-based think tank said on Thursday.
“The economy got off to a good start at the beginning of the year but, unfortunately, that momentum has largely dissipated,” said the Conference Board’s Matthew Stewart. “The economy will likely contract in the second quarter and then rebound towards the latter half of the year. However, this won’t be enough to offset the second quarter’s weakness.”
The downgrade echoed a move earlier this week by the International Monetary Fund, which lowered its 2016 forecast for Canadian growth from 1.5 per cent to 1.4 per cent, also citing weakness in the resource sector.
Friday’s stable reading on Canadian inflation for the month of June — Statistics Canada reported the annualized rate at 1.5 per cent — means there will be little pressure on the Bank of Canada to hike interest rates anytime soon to tamp down price increases. South of the border, economic analysts are increasingly expecting an earlier rate hike from the U.S. Federal Reserve.
Lower rate expectations for Canada coupled with a higher rate in the United States would tend to drive the loonie down against the American dollar.
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Major Economic Events for the week:
Date | Currency | Name | Volatility | Previous | Consensus |
7/27/2016 | AUD | Consumer Price Index (YoY) | 3 | 1.3 | 1.1 |
7/27/2016 | USD | Durable Goods Orders | 3 | -2.2 | -1.1 |
7/27/2016 | USD | Fed’s Monetary Policy Statement | 3 | ||
7/27/2016 | USD | Fed Interest Rate Decision | 3 | 0.5 | |
7/28/2016 | JPY | BoJ Press Conference | 3 | ||
7/29/2016 | JPY | BoJ Interest Rate Decision | 3 | -0.1 | -0.2 |
7/29/2016 | JPY | BoJ Monetary Policy Statement | 3 | ||
7/29/2016 | EUR | Gross Domestic Product (YoY) | 3 | 1.7 | 1.6 |
7/29/2016 | EUR | Gross Domestic Product (QoQ) | 3 | 0.6 | 0.3 |
7/29/2016 | EUR | Consumer Price Index (YoY) | 3 | 0.1 | |
7/29/2016 | EUR | Consumer Price Index – Core | 3 | 0.9 |
Upcoming Government Bond Auctions
Date Time Country
Jul 25 11:30 Germany Eur 1.5bn Jul 2017 Bubill
Jul 25 17:20 Italy Announces details of bond auction
Jul 26 11:10 Italy Holds zero-coupon/BTPei auction
Jul 27 11:30 Germany Eur 1bn 2.5% Aug 2046 Bund
Jul 28 11:10 Italy Holds bond auction