In Canada this morning, Housing Starts have increased by 200.1K throughout July, beating economic expectations of 193.0K. Urban Housing Starts gained by 182.9K, while rural Housing Starts measured in at 17.2K. Later this morning, the Bloomberg Nanos Confidence Index will update for the week ending August 8, 2014. The Index most recently measured in at 58.9 which is the lowest level since June of this year. It is quiet south of the border without any economic data on the schedule for today. Releases will pick up again tomorrow, headlined by the Monthly Budget Statement for July.
Following this morning’s update to Housing Starts, focus this week shifts to the Manufacturing Sales data scheduled for Friday, August 15, 2014. After last week’s unimpressive employment data, the Bank of Canada can delay taking an aggressive approach with their interest rate decisions. The Bank of Canada has stated that they are waiting to see continued strength throughout the economy before considering a rate adjustment. The latest update to employment only seems to delay the possibility of a rate increase even further into the future.
There are many important releases scheduled throughout the United States this week. Retail Sales are forecast to increase by 0.2% for July, matching the gain in the previous month. The Import Price Index is expected to decline by 0.4% after a gain of 0.1% in the previous period. On Friday, an update to the Producer Price Index is expected to show an increase of 0.1% for July after gaining by 0.4% in the latest release. The releases this week will all factor into the discussions at the next Federal Reserve Rate Decision, scheduled for mid-September.
In the currency markets, the Canadian dollar has made early gains against its U.S. counterpart following the better than expected Housing Starts data. Currently, it is expected to see the Federal Reserve lead the Bank of Canada in interest rate hikes as we move forward, leading to a weaker CAD versus the USD. Although Governor Poloz has never stated that he wants a weaker currency, it is implied that a lower CAD is required to increase exports to help the economy fully recover. Governor Poloz will maintain his neutral tone until we see continued economic strength over a long period of time, compared to the short streaks of strength followed by disappointing figures that we have been seeing recently.
Todays expected range: 1.0905 – 1.1005
Posted by Concentra Financial Markets