USD/CAD Heading for the Bottom of the Range, After Soft Ivey PMI
USD/CAD has been trading in a range, with the top at around 1.3650-60 and last week we saw a reversal off the top, after risk sentiment improved, which helped crude Oil and risk currencies such as the CAD. The NFP (Non-Farm Payrolls) report released last Friday once again exceeded expectations, continuing its impressive streak of 14 consecutive beats but, on a closer look, there were some less favorable findings. The unemployment rate saw a significant jump from 3.4% to 3.7%, marking the largest increase in a single month since the beginning of the pandemic, with a slight decrease in the average number of hours worked per week, which is often seen as a potential precursor to layoffs.
That report did help the USD though, although we saw no bullish move in USD/CAD , which suggested that sellers are still strong. The price traded sideways yesterday as well, but as soon as the 20 SMA (gray) caught up with the price, the decline resumed and this pair is now heading for the bottom of the range, which comes above 1.33.
The resuming of the decline occurred in anticipation of the Bank of Canada’s monetary policy meeting tomorrow, where important decisions will be made. It is expected that the Bank of Canada, under the leadership of Tiff Macklem, will maintain the interest rates at 4.5%.
Although after the surprise hike by the RBA last night we might get another surprise from the BOC, as several factors support this expectation: the Canadian economy is experiencing growth, the labor market remains tight. Although before that, the Candian Ivey PMI was released today, showing a considerable slowdown in the rate of growth, while building permits also posted a sharp decline.
Canada Building Permits for April
- April building permits -18.8% vs -5.0% expected
- Building permits in March were +11.3% (revised to +12.3%)
- Non-residential -34.6%
- Residential -6.1%
That’s a sharp decline but comes after a very strong month. Still, the overall value of permits at $9.6 billion is the lowest since December 2020, highlighting a looming construction slowdown.
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