For the week of August 31 to September 4
There are two releases out of Canada this morning which include the Current Account Balance and the Bloomberg Nanos Confidence survey. The Current Account Balance for the second quarter of 2015 posted a deficit of -$17.40B, after analysts expected just-$16.90B gap. This followed a revision to the first quarter deficit of -$17.50B to $-18.15B. Canadian direct investment abroad increased to $36.9B throughout the second quarter, mainly stemming from the manufacturing industry with mergers and acquisitions accounting for $19.7B of the activity. The Bloomberg Nanos Confidence survey will be released later today, hoping to keep confidence above the 50 mark and the prior week’s 53.2 reading. South of the border, the Chicago Purchasing Manager sentiment for the month of August is expected to land a reading of 54.5, down slightly from July’s 54.7 and the Dallas Fed Manufacturing outlook on general business activity is expected to increase from -4.6 to -3.8. BMO Capital Markets, Michael Gregory stated this morning that “The strong U.S. dollar is damping export orders while boosting imported manufacturing goods. Capital spending in the oil sector is depressed by low crude prices, while outlays on agricultural machinery and equipment are depressed by drought. However, offsetting tailwinds are coming from the consumer and construction sectors.”
In the currency markets, the CAD is showing continued weakness in the early start to the week based off soft commodity prices and the persistent concerns in China. CAD fell from 1.3261 to 1.3273 after the unexpected increase in the current account gap. Expect to see increased risk and volatility in USDCAD based off the heavy domestic data throughout the week. Markets seem to be anxious for the September 9 Bank of Canada meeting where another rate cut hasn’t been ruled out.
Todays expected range: 1.3245 – 1.3345
The Week Ahead:
Two important data out of Canada this week include GDP for June released tomorrow morning. GDP is expected at just 0.2% for the month and 0.5% on a year over year basis. Analysts expect second quarter annualized GDP of -1.0%. On Wednesday we’ll see a release to international merchandise trade for July expected down 1.25B after decreasing 0.48B in June. To round out the week, Employment data will be released Friday expecting no change to unemployment rate in August (6.8%) and net change in employment to decrease 5.0K.
Out of the U.S., the ISM manufacturing index, released on Tuesday, is expected to land in the middle of its range throughout the year at 52.6 in August. On Wednesday, Factory Orders for July are expected at 0.9% and the U.S. Federal Reserve will release its Beige Book discussing changes in employment, wages and inflation alongside any rate increase potential. This will assist market analysis in time for the FOMC meeting on September 16-17. Then on Thursday we’ll see an update to the U.S. trade balance for July expecting the deficit to narrow to -$42.20B after a -$43.84B position in June. We will close the week on Friday with non-farm payrolls hoping to gain 216K in August with the unemployment rate decreasing to 5.2%.
Posted by Concentra Financial Markets