For the week of September 17 – 21.
Similar to Thursday’s consumer prices release, retail sales for the month of August in the United States missed expectations across the board. On a headline basis, sales grew by 0.1 percent, sitting below the expected 0.4 percent. After excluding autos and gas, sales still only grew by 0.2 percent, missing the expected growth of 0.5 percent. The apparel and clothing category were the main contributing factors for August’s weak performance. However, the upward revisions of July’s growth saved this month’s figures. Headline growth was revised upward from 0.5 to 0.7 percent, while measures (excluding autos and gas) were revised upward from 0.6 to 0.9 percent.
Canada’s scheduled data releases include manufacturing sales, retail sales, and consumer prices. As of now, manufacturing sales are expected to have posted growth of 1.0 percent for the month of July. These releases will likely give investors more clarity on the Bank of Canada’s interest rate hike on October 24 (currently being priced in at an 86 percent probability). Scheduled data releases in the United States include empire manufacturing, housing starts. and building permits.
Both the United States and Canada’s government yields are trading 1 to 2bps higher with S&P futures lower (-2.3). The Canadian dollar is extending last week’s gains vs. the US dollar this morning, ahead of an important deadline for a ratified Nafta agreement this month. Today’s expected range of Canadian dollar is 1.2971 – 1.3071.
For the week of September 10 – 14.
The loss of positions was the main focus of August’s Canadian employment results release on Friday. Compared to the expected increase of 5K, 51.6K part-time positions were lost, a great deal of which were focused in Ontario. In fact, part-time positions fell by 92K, while full-time positions increased by 40.4K for the month of August.
Canada’s unemployment rate currently sits at 6.0 percent, up from July’s 5.8 percent. These employment figures will most likely be sufficient for the Bank of Canada to slow down their consideration of accelerating rate hikes.
However, the employment figures in the United States continued to increase for the month of August, with nonfarm payroll increasing 201K positions. Average hourly earnings on a month-over-month and year-over-year basis also exceeded expectations, growing by 0.4 and 2.9 percent respectively. The unemployment rate in the United States remained unchanged at 3.9 percent, despite economist predictions of decreasing to 3.8 percent.
The Canadian dollar is currently trading slightly down against the US dollar. Today’s expected range is 1.3133 – 1.3233.
For the week of September 4 – 7.
Despite being a short week, scheduled economic releases for Canada include policy decisions, international merchandise trade data for July, building permit numbers for July, employment figures, and the Bank of Canada’s interest rate decision. Currently, there is a very small chance (11.6 percent) of a rate hike being implied by the market. However, markets are expecting a 76 percent interest rate hike closer to the October policy meeting.
Scheduled economic releases for the United States include manufacturing PMI, construction spending, ISM manufacturing, trade balance, and employment data. The change in nonfarm payrolls is expected to have increased to a level of 191K for August from the previous level of 157K. The unemployment rate is expected to remain unchanged at 3.9 percent.
The Canadian dollar is trading down significantly against the United States this morning. Uncertainty remains over whether or not an agreement will be reached between Canada and the United States on trade. US president Donald Trump has expressed there is no “political necessity” to keep Canada in the NAFTA agreement. Today’s expected range is 1.3114 – 1.3214.
For the week of August 27 – 31.
Fed chairman, Jerome Powell, made his first speech at the Kansas City Fed’s Annual Policy Symposium in Wyoming on Friday. Powell noted the current path of the gradual interest hikes is FOMC’s approach to balancing the expansion shortening if rates move too fast, or overheating if rates move too slowly. Powell acknowledged although unemployment is low, “there does not seem to be an elevated risk of overheating.” He continued to note estimates regarding academic model usage were at best “hazy” navigational guides, further distinguishing the fact that monetary policy is based on economic performance, and one of the main contributing factors to the conservative approach of gradual rate hikes. The Fed chairman said he expects the economy’s “strong performance will continue” and the “gradual process of normalization remains appropriate.”
During an interview in Wyoming on Friday, Bank of Canada Governor, Stephen Poloz, noted although the recent headline inflation of 3 percent is transitory and will eventually reverse, the focus is on the stability of core inflation, which is near its 2 percent target. Poloz also commented digitization is one of the main reasons why not only economies have more capacity to grow without fueling inflation, but also why interest rate normalization by traditional models is slower than predicted. Digitization has already led upward revisions of growth and investment in previous years, and possibly under-reported international trade.
This week will be relatively quiet for Canada; the only notable economic release will be the Q2 GDP figures on Thursday, which is the last piece of important data before the Bank of Canada (BoC) policy meeting on September 5. Although the BoC has previously raised interest rates four times within the last year, market participants are expecting as many as three more future hikes. Major releases in the US this week include wholesale inventories, FDP numbers, personal income/spending data, and the University of Michigan Sentiment gauge.
Both US and Canada government yields are trading flat to 2bps higher with S&P futures higher (+10.3). The Canadian dollar is trading slightly lower this morning after Poloz’s comments this weekend. Today’s expected range of Canadian dollar is 1.2998 – 1.3098.
For the week of August 20 – 24.
According to Statistics Canada, the Consumer Price Index in July had a strong gain of 3 percent year over year, beating expectations of 2.5 percent. The Headline CPI was also up 0.5 percent month over month versus estimates of 0.1 percent. Energy, travel services, and mortgage interest cost categories led the gains: gasoline prices were up 25.4 percent, airline tickets were up 28.2 percent in the past year, and interest rates for mortgages were 5.2 percent higher. Natural gas (-5.7 percent), telephone services (-5.1 percent), and traveller accommodation (-4.1 percent) led the price declines in July. The largest upside and downside contributor to monthly inflation was the recreation/education category and clothing/footwear category, respectively. Inflation expanded the fastest since 2011, which suggests Canada’s retaliatory tariffs had little impact on July CPI gains.
International investors bought $11.5 billion of Canadian securities in June, including a total of $11.7 of Canadian bonds. Meanwhile, Canadian investors had their largest investment in foreign securities since January 2018, adding $11.3 billion to their portfolios. As a result, international transactions in securities generated a net inflow of $256 million into the economy in June.
This week will be relatively quiet for Canada and US economic releases. We have wholesale trade sales and retail sales data coming out in the middle of the week. In the US, we have existing home sales, August 1st FOMC meeting minutes, Markit PMI data, and durable goods data to be released this week. The focus will be on central bank speak from Jackson Hole on Thursday and Fed Chair Powell’s keynote speech on monetary policy in a changing economy on Friday.
Both US and Canada government yields are trading flat to 1bps lower with S&P futures higher (+6.6). The Canadian dollar is currently trading 1.3071 against the US dollar, todays expected range is 1.3021 – 1.3121.
For the week of August 13 – 17.
According to Statistics Canada, employment rose 54.1K in July from 31.8K in prior month, beating economists’ estimated gain of 17K in employment. The majority of the gain came from part-time employment (+82K), followed public employment (+50k). Full-time employment fell 28K, vs. last month’s gain of 9K, while private employment rose 5.2K in July. Average hourly wages came in lower at 3 percent, from 3.5 percent in June. Canada’s unemployment rate came in a smidge lower than estimate, at 5.8 percent vs. 5.9 percent in June, which is now tied for its lowest level since the 1970s. The unemployment rate in Ontario hit 5.4 percent, matching the lowest rate on record since 2000.
Consumer prices in the United States came in line with expectations on a month-over-month basis and year-over-year basis in July, at 0.2 percent and 2.9 percent, respectively. Weakness in energy was a drag to the headline CPI increase relative to the core CPI. The decline in electricity (-1.4%) and utility gas service (-1.7%) more than offset rising gasoline inflation (0.5%).
Contagion spreading to euro area lenders were a concern last week, after the Financial Times reported that the European Central Bank is becoming concerned about the exposure of some of the region’s banks to Turkey. Turkey’s currency, the Lira, plunged as much as 13.5 percent last Friday. Subsequently, the US plans to double tariffs on Turkish steel to 50 percent, and raise the rate on aluminum to 20 percent. President Erdogan said Turkey was in an ‘economic war’ while ruling out higher interest rates to stem the Lira’s losses or seeking an international bailout.
Scheduled releases in Canada this week include existing home sales, manufacturing sales and consumer price index data. Schedule releases in the US this week include import and export price index, retail sales, various manufacturing figures, and readings for the University of Michigan’s Sentiment.
Both US and Canada government yields are trading flat to 1bp lower with S&P futures lower (-3.5). The Canadian dollar slid to its weakest level against the dollar since July 24, as haven currencies outperform on fears of Turkey crisis. Today’s expected range of Canadian dollar is 1.3105 – 1.3205.
For the week of August 7 – 10.
Scheduled releases in Canada this week include building permits, housing starts, and employment numbers. Scheduled releases in the United States this week include wholesale inventories and consumer prices. Excluding food and energy, consumer prices are expected to grow by 0.2 percent for the month of July. On a year-over-year basis, prices are expected to jump by 3.0 percent, or 2.3 percent when excluding food and energy.
China is currently fighting back against the implication of tariffs on their country set by the United States. Once the United States confirms their measures, Chinese officials announced they will be placing duties of up to 25 percent on approximately 60 billion dollars worth of goods.
Nonfarm payrolls fell short of the expected 193K for the month of July, landing at 157K. However, both May and June’s postings were revised and combined to 59K jobs, making up July’s shortfall. As expected for the prior reading, the employment rate for the United States decreased to 3.9 percent from 4.0 percent.
Canada’s international merchandise trade deficit declined to the level of -0.63b for the month of June, lower than the prior level of -2.72b. Oil producers and aircraft makers were the main contributing factors in Canada’s export increase. Overall, exports increased by 4.1 percent, coming in as a slight surprise in the face of recent tariffs (most notably on steel) imposed on Canada by the United States.
The Canadian dollar is looking strong against the US dollar this morning. Today’s expected range is 1.2919-1.3019.
For the week of July 30 – August 3.
Annualized quarter-over-quarter GDP growth in the United States rose to 4.1 percent, marking the largest growth rate since 2014. Although slightly shy of the expected growth of 4.2 percent, the rise was significant from the revised first-quarter GDP reading of 2.2 percent. The growth will more than likely be used by Trump administration to prove the success of recent policy changes. On the contrary, personal consumption jumped by 4.0 percent, exceeding expectations of a 3 percent jump.
Canada’s scheduled releases this week include industrial product price index, month-over-month and year-over-year GDP numbers, Markit Canada manufacturing PMI, and international merchandise trade. Scheduled releases in the United States this week include home sales, personal income and spending, ADP employment data, durable goods, and non-farm employment data. An FOMC rate decision is also scheduled for Wednesday, where markets see less than a 1.3 percent chance for a rate hike.
The Canadian dollar is trading up slightly against the US dollar this morning. Today’s expected range is 1.2995 – 1.3095.
For the week of July 16 – 20.
The University of Michigan sentiment posting in the United States dropped to a level of 97.1 for the month of July, missing expectations of 98.0, and falling from June’s posting of 98.2. The detail also notes the decreased reading of inflation for both current conditions and predictions for 1 year, and 5-10 year. The decrease will most likely fuel the ongoing fire of the debate on whether or not the Federal Reserve will proceed to increase interest rates.
In the Federal Reserve’s semi-annual monetary policy report, the central bank re-affirmed its position of gradually hiking interest rates. The Federal Reserve also confirmed their belief these hikes will be able to exist along with an expanding economy, strong labor numbers, and an inflation rate close to target level. If the Reserve is planning to stick to their original plan, they will need to hike interest rates twice more in 2018 (after already hiking twice this year).
Even though oil prices are down slightly this morning, the Canadian dollar is currently trading up against the US dollar. Today’s expected range is 1.3092 – 1.3192.