With the stronger trade surplus, I would have expected the Canadian dollar to do a little bit better, except of course at the same time the U.S. trade deficit came in smaller than expected. As a result it's been positive for the U.S. dollar.
We're still expecting one more rate increase and I think this probably should not have too much of an impact overall.
Basically whatever high level of investment there last year, there will be even more this year. But we have some good gains in other areas too.
I think the next interest rate increase is pretty much anticipated. We (forecast) another interest rate increase coming right after that as well, we think this is pretty supportive of that.
It is likely that the level of starts in both months was helped by milder than normal weather (the previous month, for example, was the strongest level of starts since January 1987), though they still represent strong underlying demand.
I suppose the Ivey may be having some small effects, but we don't think it should be. Fundamentally we don't think there's been any real shift in the Canadian economy.
We'll be watching the commodity prices again for the next little while in terms of direction for the Canadian dollar. We've gone through now C$1.14 and we're in a new range again.
Today's number might represent some upside risk to that.
The overall tone of the report is pretty mediocre at this point.
With the commodity prices easing, especially oil and natural gas, the expectation is that the Canadian dollar would actually come down somewhat.
While this is the largest monthly decline in nearly five years, the fall is entirely attributable to civilian aircraft, as non-defense aircraft orders returned to a normal pace, after a stunningly strong December.
Everything this week is going to be hinging on the Bank of Canada early on -- there are also some important data points which should be supportive overall -- but the question really is the statement.
Commodity currencies are being hit particularly hard but other currencies are holding up well as interest rate expectations for the other two regions are rising.
The strength in this component, which includes apparel and home entertainment goods, bodes well for Christmas retail sales.
The business conditions survey is going to take center stage for Canada, maybe in particular because the Canadian dollar seems to be playing an important role in the Bank of Canada's thinking now.
This is a supportive report for Bank of Canada's 'modest' rate hike plans -- good growth, but lower imported costs.
There were probably industrial prices that were helping support the Canadian dollar and also some of the data that we'll get at the end of the week could be on the strong side.
They probably will not explicitly (address it.) But there are several ways in which they can bring that up and talk about it in terms of global risk and the adjustment to international terms of trade, or...that inflation has been coming in lower than expected.
It looks like the Canadian dollar has really recovered. Part of the reason has to do with the commodity story.
Even with the Canadian dollar appreciating some 6 U.S. cents through the year, both exports and imports in 2005 surged to record high levels.
Every one of them gets to be pretty important when considering the Fed is going to be watching the data ever more closely to figure out where interest rates are going.
The Bank of Canada is more likely to move more than the U.S..
The Bank of Canada has talked about the risks to 2007 on the downside. We would see the Canadian dollar weakening.
It's difficult to pinpoint the move on any one thing at this point, but with the commodity prices coming off, that could be one of the factors.
The U.S. economic releases were not particularly outside of expectations in any way.
There's very little direction. Everyone's tuning into (the payrolls figures) especially since the Fed has been talking about watching incoming data for guidance on how they're going to move in March.
A rise in longer-term bond yields would arguably be seen as doing some of the Fed's tightening work.
The jobs number was a blowout. It was strong across the board.
In terms of how it affected financial markets, it did have an immediate impact, but I don't think it's long-lasting at this point until we know a little bit further what the situation is surrounding it.
The main factor behind the Canadian dollar appreciation is likely the expectation of tomorrow's Bank of Canada statement accompanying the widely expected hike.
