Canadian economy brightens amid positive data releases
Monday 15 May, 2023
Daily Currency UpdateThe Canadian economy begins the week on the upside with the release of their housing start data which indicates the number of new residential buildings that started construction last month. Housing starts data came in positive at 262,000, above expectations for 221,000 and a large increase from the previous 214,000. This higher-than-forecasted figure is a positive sign for the Canadian economy as it demonstrates growth in industry and added construction jobs. In another data release out of Canada, positive wholesale metrics indicate consumer spending is up. Wholesale data shows a 46% increase in sales, well above the forecasted -0.3% decline.
Key MoversThe US dollar index (DXY) strengthens as consumer inflation expectations rise, hitting a five-week high. The Empire State manufacturing index data came in well below forecasted levels with expectations for a -3.7 decline. The actual index data showed a -31.8 fall after the previous print of 10.8. This sharp decline depicts a rapid fall in business in New York state which affects hiring, spending, and investments. Other data released by the University of Michigan showed Preliminary Consumer sentiment falling to 57.7 from 63.5 previously and well below expectations for 63.0. This survey asks consumers to rate the current and future levels of economic conditions. These results could forecast a slowing economy as consumer spending habits account for a major amount of overall economic activity. The combination of these poor data releases and a strengthening DXY indicates a higher possibility of a Federal Reserve rate hike during their next meeting.
West Texas Intermediate (WTI) oil prices are up 1.6% to 70.761 a barrel from the previous close of the session at 70.057. As one of Canada’s greatest exports, demand for oil strengthens the CAD.
Euro wholesale prices are down both month-over-month and year-over-year by -0.4% and -0.5% respectively. The Eurozone’s industrial production was also down -4.1%. These negative numbers are released amid the European Union’s hawkish economic forecast today which is largely due to lower energy pricing and a strong labor market. This combination of factors will likely work together to strengthen the EUR/CAD pair.
The United Kingdom also saw a Leading Economic Index (LEI) data release which predicts the direction of the British economy based on economic indicators. The LEI showed a 0.9% drop in March to 77.1.
- EUR/CAD: 1.4634 - 1.5191 ▼
- GBP/CAD: 1.6569 - 1.7167 ▲
- AUD/CAD: 0.8969 - 0.9153 ▲
- USD/CAD: 1.3363 - 1.3678 ▼