USD/CAD Weekly Fundamental Analysis, March 4 – March 8, 2013 Forecast

Weekly Analysis and Recommendation:

The USD/CAD continues to weaken as gold and oil tumbled and eco data and GDP numbers miss the mark. The CAD is trading at 1.0268 off the high of 1.0342. Jobs data turned south during January after a red-hot streak to close 2012, when 183.9k jobs were added during the final 5 months of the year (or an average of 36.8k jobs per month — roughly double the long-run monthly average). The job gains were significantly stronger than what the underlying pace of economic growth would have implied. We expect that the lagged effects of soft economic outcomes during December will lead to a muted jobs number in February. Our forecast is for a soft 5k jobs gain that leaves the unemployment rate a tick higher at 7.1% due to re-entries to the work force. One risk is that the ranks of the self-employed swelled by 23.9k even as the employees category dropped by a steep 45.8k in January, so there is a chance for some pay-back in this category.

Canada’s trade data were very weak through the final three quarters of 2012, with the country racking up a deficit of -C$12bn over the course of the full year compared to a small surplus of C$910m during 2011. Traders cannot expect that trend to improve in 2013 and are forecasting a deficit of -C$550m for January, a slight improvement from December’s -C$900m deficit but still no great shakes. We expect a slight narrowing of the deficit due to higher prices for Canadian crude distillates and some strength in new orders that could translate into better machinery shipments. December was a difficult month for most Canadian export sectors. One risk here is that CAD started to weaken in January, and the country — currently running trade deficits — will start to pay the higher import bill sooner or later.

Housing starts for February (March 8) will be of significant interest after the annualized pace of residential construction plummeted in January, falling to 160k — the lowest level since the recession.

 

The Canadian dollar (CAD) adopted a defensive stance of late, particularly influenced by investor attention on the housing market, softness in sales data and adjustments to energy prices and bilateral trade prospects. In addition, the Bank of Canada has softened its hawkish stance. Together this has forced a downward re-pricing of CAD.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events for the week of February 25 – March 1 actual v. forecast for the Canadian & US Dollar

Historical: From 2010 to present

Highest: 1.0853 CAD on May 25, 2010.

Average: 1.0090 CAD over this period.

Lowest: 0.9407  CAD on Jan 26, 2011.

 

Economic Highlights of the coming week that affect the American and Canadian Markets

Government Bond Auction

Date Time Country 

Mar 05 10:10 Norway

Mar 05 10:15 Austria

Mar 05 10:30 Belgium

Mar 05 10:30 UK

Mar 05 15:30 UK

Mar 06 10:10 Sweden

Mar 06 10:30 Germany

Mar 07 09:30 Spain

Mar 07 09:50 France

Mar 07 15:30 Sweden

Mar 07 16:30 Italy

Mar 07 16:00 US

Mar 08 11:30 Belgium

Mar 08 16:30 Italy