The Canadian dollar continues trading at 1.3666 (14 month low) on a low volume trading session due to the May Day holiday. The price of oil is keeping the loonie lower against the greenback despite a solid performance from the Canadian manufacturing sector. The manufacturing purchasing Managers Index (PMI) reported on Monday is the highest in six years (55.9) a gain from last month’s 55.5.
US data on Monday was mostly negative. The US manufacturing PMI disappointed with a 54.8 level below the forecast of 56.6. Construction spending contracted by 0.2 percent in March. Despite the optimistic comments from US Treasury Secretary Steven Mnuchin about the economy, the USD was mixed as U.S. President Donald Trump issued comments on financial regulations that spooked the markets.
Soon after Canadian authorities in Ontario passed a 15 percent tax on housing by foreign buyers the news hit that Home Capital Group, the largest non-bank mortgage lender asked of for a $2 million Canadian dollar line of credit to offset the exiting of saving account deposits. The company will report first quarter results later this week.
The USD/CAD gained 0.1 percent in the last 24 hours. The currency is trading on a thin volume trading day due to the May holiday in some major markets. The US economy posted a disappointing 0.7 percent GDP growth in the first quarter. The forecast called for a 1.3 percent reading which was already pointing to a slowdown form the last quarter of 2016. This morning the Institute for Supply Management published the US purchasing managers index (PMI) at a 54.8 reading. It was a miss on the expectations of 56.6. A reading above 50 is considering an expansion, but there is no denying that the economic health of the United States has slowed as per the views of purchasing managers.
West Texas lost 1.05 percent at the beginning of the week. The price of WTI is $48.38 as US shale drillers add more oil rigs driving supply up despite the efforts of the Organization of the Petroleum Exporting Countries (OPEC) deal to reduce production with members and other major producers. The official manufacturing PMI from China released over the weekend pointed to a slower than expected growth which will put downward pressure in commodities.
The OPEC and other producers will meet on May 25 to discuss an extension to the production cut agreement. The deal was almost a year in the making as members were at odds on who was expected to participate.
Gold lost 0.962 percent in the last 24 hours. The precious metal is trading at $1,256 after a deal reached by the White House will avoid a government shutdown. The news drove down the price from the daily high of $1,271 to the current price level. There has been movement to the upside as Donald Trump has issued some comments on the regulation of Big Banks which caused anxiety in the stock market.
The metal is range bound ahead of the two-day Federal Open Market Committee (FOMC) meeting that is not expected to end in a rate hike announcement on Wednesday morning. Gold has been bid as a safe haven during turbulent times but as the Fed signals a stronger willingness to raise interest rates it will put downward pressure on the yellow metal. Softer US economic data has kept optimism in check ahead of the central bank’s statement.
Market events to watch this week:
Tuesday, May 2
12:30am AUD Cash Rate
AUD RBA Rate Statement
4:30am GBP Manufacturing PMI
6:45pm NZD Employment Change q/q
Wednesday, May 3
4:30am GBP Construction PMI
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Non-Manufacturing PMI
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Statement
USD Federal Funds Rate
9:30pm AUD Trade Balance
11:10pm AUD RBA Gov Lowe Speaks
Thursday, May 4
4:30am GBP Services PMI
8:30am CAD Trade Balance
USD Unemployment Claims
4:25pm CAD BOC Gov Poloz Speaks
9:30pm AUD RBA Monetary Policy Statement
11:00pm NZD Inflation Expectations q/q
Friday. May 5
8:30am CAD Employment Change
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change
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Alfonso Esparza
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
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