Significant Drop in Canadian Manufacturing Shipments Pushes EUR/CAD Higher
A -3.3% monthly change in Canadian manufacturing shipments has weakened the ‘Loonie’ further, aided by a -2.7% fall in the price of Brent Crude oil. Shipments had been forecast to decline -1.5% after last month’s 2.3% rise. Brent Crude is currently trading around US$42.65 per barrel.
According to Nick Exarhos, economist at CIBC World Markets, ‘Hopes for a Canadian manufacturing renaissance took a hit in February. Today’s pullback suggests that the February GDP print will likely be an ugly one.’
EUR/CAD Advances as Alberta Forecasts -C$10b Deficit
Alberta, one of Canada’s provinces heavily reliant upon crude oil production, has revealed the extent of the harm caused by the low level of ‘black gold’ prices. The province predicts it will post a deficit of -C$10.4 billion for the 2016/17 fiscal year, with total debt rising to -C$57.6 billion by the 2018/19 financial period. As a result, the government could be forced to scrap legislation limiting debt to 15% of GDP.
EUR/CAD Gains Shrink on Flat Eurozone Consumer Prices
Despite printing as expected, or above forecasts, today’s Eurozone inflation data hasn’t painted a particularly optimistic picture for investors. Month-on-month (MoM) inflation jumped from 0.2% to 1.2% as predicted, while the final year-on-year (YoY) figure stagnated, rather than showing deflation slowing from -0.2% to -0.1% as anticipated. The lack of deflation hasn’t cheered investors, however, with the news that inflation was at 0% for March highlighting the struggles of the European Central Bank (ECB) to boost the economy.
However, there have been suggestions that the ECB will welcome the development. The huge drop in oil prices last year continues to drag down inflation figures, with year-on-year Consumer Price Index data reflective of a time in which Brent Crude oil was around $20 more expensive.
- ECB Nowotny expects inflation normalisation to start ‘this summer’
- Bank of Canada (BOC) raises 2016 growth outlook
- OPEC warns of slowing global oil demand
- Greek bailout could cause friction at IMF Spring Meeting
Sentiment towards the Euro is currently mixed, although the common currency is recovering from yesterday’s correctional trading. Significantly worse-than-expected Eurozone industrial production statistics cooled appetite for the Euro, although the outlook for growth in Q1 remained positive.
Nowotny Fuels Euro to Canadian Dollar Uptrend after Dismissing Inflation Fears
Confident statements made after the close of trading in New York yesterday by European Central Bank (ECB) policymaker Ewald Nowotny have helped boost the Euro today. Nowotny dismissed concerns regarding the low rate of inflation in the Eurozone and offered hawkish predictions for its recovery, stating:
‘I want to underline this because, frankly speaking, I think one should not over-dramatize the low inflation rates that we just experience now. I think there will be movements towards a normalisation of inflation rates starting this summer. We do not expect that oil prices will go down with [as] dramatic a decrease as last year, so just automatically as an echo effect we will have higher inflation.’
The Euro also received a boost from Italian inflation data, which showed a smaller-than-expected rate of harmonised deflation year-on-year in March and monthly growth of 2.1%.
OPEC Warning Undermines Upbeat Bank of Canada Statement, CAD/EUR Weakens
Yesterday’s positive outlook from the Bank of Canada (BOC) boosted the ‘Loonie’, sending CAD/EUR to a 19-week high. After strengthening over the past week on the back of an oil price rise, the Canadian Dollar was further boosted by the BOC’s upwardly-revised growth predictions. Despite the International Monetary Fund (IMF) having cut Canada’s GDP outlook for 2016 to 1.5% from 1.7%, the BOC raised its expectations from 1.4% to 1.7%. Investors were particularly cheered by the Bank’s assessment that the latest infrastructure spending measures announced in the Federal Budget would boost GDP by 0.5% this year and 0.6% in 2017.
The forecast was based in part upon Brent Crude oil prices being higher than the BOC had initially predicted and the assumption that they will hold around the US$40 per barrel mark. This could be under threat from the latest forecast from the Organization of Petroleum Exporting Countries (OPEC), which anticipates a slowing in global demand. The forecast, released yesterday but overlooked in the wake of the BOC report, estimates that demand will grow by 50,000 barrels per day less than previously anticipated. This could worsen the supply glut, despite OPEC steps to alleviate pressure on the market, and weaken ‘Loonie’ sentiment.
EUR/CAD Exchange Rate Forecast: IMF Spring Meeting could Spark Volatility
The Canadian New Housing Price Index will conclude today’s data. Tomorrow marks the start of the International Monetary Fund’s Spring Meeting in Washington, which could spark volatile movement for the Euro.
The Greek bailout is expected to be a significant point on the agenda, with the meeting interrupting negotiations between Greece’s creditors. The EU and the IMF currently disagree on the extent of the Greek fiscal shortfall, while Athens continues to contest the harsh austerity measures required as a condition of the bailout.
The only data for Canada tomorrow will be the Manufacturing Shipments figures for February.
Current EUR, CAD Conversion Rates
The Euro to Canadian Dollar exchange rate is currently trading between 1.4446 and 1.4511, while the Canadian Dollar to Euro exchange rate is trending in the region of 0.6889 and 0.6916.