Canada posts weak building and PMI data ahead of rate announcement
Daily Currency Update
Canadian building permits, a measure of the value of new building permits issued, came in significantly lower than expected at -18.8 versus the expected -5.0. This implies that there will be much less new construction across Canada in the coming months. The Ivey Purchasing Manager’s Index (PMI) measures month-to-month economic activity through a panel of purchasing managers. This figure came in below forecasts at 53.5 versus the expected 57.2 expected for May.Key Movers
The dollar index (DXY) remains up slightly today after yesterday’s weak Institute of Supply Management (ISM) services data, which added to recession fears in the US. This news coupled with somewhat mixed jobs data on Friday which showed a higher unemployment rate, but much higher-than-expected job creation added more reassurance that the Federal Reserve will not raise rates at the next Federal Open Market Committee (FOMC) meeting. Currently, the market is predicting rates to stay flat at the next meeting, with a chance of a hike in the following meeting. Markets are eyeing unemployment data out of the US this coming Thursday for more clarity on where the Fed will take the USD.The Reserve Bank of Australia decided to raise interest rates to 4.1%, the highest level since 2012, as the country battles inflation. The Consensus call was for no rate hikes, so this was a shock to the market. This is bullish for the Aussie dollar, and it is currently trading above most major currency pairs.
The European Central Bank (ECB) released its consumer expectations survey which showed inflation expectations for the next 12 months fell to 4.1% from 5.0% in March. Economic growth expectations for the next 12 months came in at a slight improvement of -0.8% from -1% in March. Overall, Eurozone participants seem to think inflation will be tamed and expect the economy to recover. Eurozone retail sales came in with no change month-over-month versus the expected 0.2% lift. Year-over-year, retail sales dropped 2.6% versus the -1.8% expected. Overall, the European economy is still lagging, this is likely due to higher interest rates.
Expected Ranges
- EUR/CAD: 1.4329 - 1.4407 ▼
- GBP/CAD: 1.6639 - 1.6722 ▼
- AUD/CAD: 0.8882 - 0.8955 ▲
- USD/CAD: 1.339 - 1.3452 ▼