Plunging Oil Prices and the few details of fiscal stimulus could force BoC to cut interest rates
at the end of 2015, the possibility of a rate cut from the Canadian central bank in January was low with the majority of analysts are beyond the first quarter of 2016. the Federal reserve has announced an increase in highly anticipated rate the US benchmark, which gave leeway to the Bank of Canada (BoC) about his next move. The CAD depreciated giving an advantage to exporters and boost growth expectations. Now, the rapid decline of oil (10.85 percent last week) could force the hand of the BoC Governor Stephen Poloz. Economists and analysts are divided on what to expect next week that the fundamentals of Canada have changed. Although the movements are not a surprise, as they were largely expected, the rate at which they developed and the market reaction has a lot to update their forecasts for next move by the Bank of Canada.
The views and forecasts are divided on the BoC announcement. There is a year the central bank cut rates proactively before falling energy prices. The BoC would reduce the interest rate an additional period in 2015 to a record 0.50 percent. Government lacks details of the Liberal budget in March is said to include the fiscal stimulus puts the weight of the economy squarely on Stephen Poloz and the Bank of Canada.
The Bank of Canada (BoC) will announce its rate statement and its monetary policy report, Wednesday, January 20 at 10:00 am EST. At 10:30 am EST the Ministry of Energy of the United States will release crude stocks. BoC Governor Stephen Poloz will offer a press conference at 11:15 am EST. The combination of monetary policy announcement and commodity inventories will guide the price action of the CAD. Investors will watch the ads and their impact on the Canadian dollar.
The USD / CAD has been another day of volatile trading
Tuesday with little to show for it, if only watch the opening and closing of the last 24 hours. The USD appreciated 0,016 percent compared to the CAD, but the currency pair at one point traded as low as 1.4432 by the difference between the top and bottom of almost 1 percent in a day. Oil prices were higher with positive news for China boost global demand for commodities. Reality set in oil made gains and in turn hurt the CAD which ended trading around 1.4560.USD / CAD technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1.4522 | 1.4533 | 1.4546 | 1.4570 | 1.4581 | 1.4594 |
fiscal policy measures must sooner rather later that
the Liberal government came to power last year on a platform of stimulus, but market observers, they should reach a deficit as a result of their recovery program do not start with a report as the final budget showed. Given the limited track left to the Bank of Canada for rate cuts (0.50 percent) before going into negative territory, it requires more government. Finance Minister Bill Morneau was active in sending a message of comfort that the government will act on its promises to invest in infrastructure and fiscal stimulus. The budget will be presented in March, but the calendar to discuss some of the new measures has moved up in view of the sharp fall in energy prices.
Canadian Prime Minister Justin Trudeau promised that the Liberal budget will be unveiled in March will look at the economic factors deteriorate rapidly. As part of the economic platform for Canadian election the Liberal Party foresaw a need for tax incentives to stimulate growth. The rapid decline of oil has put pressure on the Bank of Canada to avoid a rapid decline which could affect the global economy, even if it can benefit to exporters. The government must intervene and alleviate the burden of the central bank and its commitment to strengthen is a step in the right direction.
The historic decision of the US Federal Reserve to raise rates was announced in December, and since then, global macroeconomic headwinds have rebounded to the point where the rate increases 4 to interest are considered unlikely with forecasts calling for 2 or 3 as it is also a year of US presidential election, which would limit the interventions of the central bank in the key months leading to the election.
Canadian Fundamentals Buckling Under Pressure
Canadians were net buyers of foreign securities, adding the outputs of Canadian instruments. Investor confidence does not take well against the rapid decline in energy prices. This is the main argument for a Bank of Canada rate cut, the Canadian dollar is already at a level where exports are expected to thrive. The problem is twofold. Manufacturing was decimated following the 08 crisis, ironically with the strong loonie executioner that factories have left for destinations beyond the sea. Exports recovered in industries that can adapt quickly as some services. While this could provide a boon to the entertainment industry and more productions move north, it does nothing for cities not named Vancouver or Toronto.
The November data on securities purchases are not encouraging, not even at the time the release was reached fever and the price of oil and the loonie took a path in two months. More important than the actual action of the Bank of Canada will be your governor Stephen Poloz takes when speaking to reporters. Last year was full of misfires central bank communications, and Poloz has a chance to start the year on track tomorrow.
CAD events to watch this week:
Wednesday, January 20
8:30 CAD Manufacturing sales m / m
8:30 Building Permits USD
8:30 USD CPI m / m
10:00 report on monetary policy BOC CAD
10:00 CAD BOC rate Statement
10:30 USD crude oil stocks
11:15 CAD BOC Press Conference
Friday, January 22
8:30 CAD core CPI m / m
* All EST
hours for a complete list of events planned in the foreign exchange market check the economic calendar MarketPulse
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