USD / CAD managed to trade in a range between 1.38 and just below 1 40 in the last two weeks of 2015. uncertainty about oil prices and the decision of the Federal Reserve to eventually raise interest rates took their toll on the loonie. The Canadian currency has not found the support that the income of the rich oil in Alberta disappeared and has not been compensated by export sales. The competitive advantage of a softer currency has not sufficiently stimulated exports as most of the manufacturing base was moved to more competitive prices Nations in the past decade.
The Canadian economy will have a difficult start with the conflict in Saudi Arabia and Iran, adding the volatility of oil prices, as the United Kingdom and even pumping crude to the United States to record levels and keeping downward pressure on the price below $ 40. The Fed will be in no hurry to add a new increase in its benchmark interest rate
Fundamentals Canadian DAMAGE beginning of year
the first week of 2016 set the pace for the rest of the year. Canadian economic indicators on deck this week will balance data and commercial use. The manufacturing PMI has already disappointed with a reading of 47.5 from the November figures compiled by RBC Canadian bank, the lowest since 2010. The gauge has been below 50 for five months, underscoring the lack of options when looking to offset declining energy exports.
employment in Canada will be published simultaneously with the US data which eclipsed the market reaction to the 35,000 jobs lost in November. December data should reverse this trend with a gain of 10,000 jobs, but again can be ignored if the ratio of the non-farm payrolls offers above or below expectations.
The Bank of Canada is expected to keep the rate unchanged in January pending a recovery in oil prices and more clarity regarding the Federal Reserve of the United States provides for monetary policy. The release of the FOMC historic December meeting minutes Wednesday will provide some guidance on the internal debates among US policymakers.
Price of oil under pressure on supply and political unrest
The execution of a Shiite cleric in Saudi Arabia has led Iran enter into a diplomatic conflict with the United Kingdom. Sudan and Dubai have supported Arabia and are applying diplomatic sanctions given the tone of the rhetoric coming out of Iran. The price of oil has been sensitive to the conflict more and more, but the fact that all producers are near record levels, and even small American producers who were thought to be erased with crude below $ 40 remain in the business there is little support for oil at current levels.
The Organization of Petroleum Exporting Countries (OPEC) maintained its production quota at record levels, but promised to help stabilize world prices. There was no indication that this will result in a reduction in production. Iran is set to join the elite group of producers that global sanctions are lifted and add another source of energy to the growing list. Demand grew along the supply given the slowdown in emerging market economies, notably China.
The weak PMI this week gives no hope of an early end to the slowdown and will prove to be a difficult time for energy producers. The CAD as commodity money will be pulled down by the underperformance of energy prices in the event of demand pick-up and absorb all the extra stuff on the black market.
CAD events to watch this week:
Wednesday, January 6
08: 15 USD ADP non farm employment Change
8:30 CAD trade balance
8:30 USD trade balance
10:00 USD ISM non-manufacturing
2:00 p.m. USD FOMC Meeting Minutes
7:30 p.m. AUD trade balance
Thursday, January 7
8:25 CAD BOC Gov Poloz Speaks
8:30 USD unemployment claims
7:30 pm AUD sales retail m / m
Friday, January 8
8:30 am USD non-farm employment Change
8:30 USD unemployment
8:30 CAD Change of job
8:30 pm CNY CPI y / y
* All times EST
for a full list of events planned for the visit of the foreign exchange market MarketPulse economic Calendar
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