Some Canadian High Impact Reports To Go With U.S. Payrolls Report

Includes: FXC, UDN, UUP
by: Ralph Shell

Why do the Canadians share their high impact economic reports on the same day the US issues the NFP Report? Perhaps they are used to living in the shadow of their southern neighbors. Tomorrow in the US, of course, the dominant news is the August NFP Report. The guesses are for the NFP to be 180K, up from 162K in the prior month. We also get the US unemployment rate for August, estimated to remain unchanged at 7.4%.

The Canadian reports are similar - the employment change, expected to be a positive 20K versus -39.4K in the prior month, and the unemployment rate of 7.2%, unchanged from the prior period. The Canadians have a bonus report, the Ivy School of Business PMI Report. The last Ivy Report forecast was 48.4, a level that signaled a contraction. The forecast for tomorrow is expected to be 53.

Recent US stats have been positive. Consequently traders are expecting the Fed to make a slight reduction in its rate of debt purchases should the US numbers not reveal a surprise. Anticipating the taper-on to commence, there is little change in US equities today and the US 10-year bond yield has gone up to the 3% area.

What happens if the US numbers fall short of expectations? This is not what is priced into the market. We do not know what numbers the Dept. of Labor will give us, but there is a Gallup poll circulating that the US Unemployment rate is really in the vicinity of 8.5%.

Recently the USD/CAD (NYSEARCA:FXC),(NYSEARCA:UUP) (NYSEARCA:UDN) had been trading in the near 1.05. A surprise might jolt the Canadian dollar out of the range and the US dollar would trade toward the 1.03 handle. Even without a US dollar surprise, the loonie may have some value here.

Canada is the biggest supplier of crude oil to the US. WTI crude, trading at 1.0850, is the highest in price in years. Though Canadian oil trades at a discount, this price still gives the Canadians, a hearty balance of payment boast.

Another reason for Canadian optimism is the recovery in the demand for real estate. Latest year-vs.-year sales increases were sharply higher, up 52.5% in Vancouver, up 27.5% in Calgary and 21% in Toronto. Granted the numbers are against weak sales a year ago. August 2012 was the first month after Canadian FM Flaherty had tightened mortgage rules. It hurt real estate activity then but business is now picking up.

The real estate market has become so hot that the Bank Of Nova Scotia's chief executive officer Rick Waugh says the Bank of Canada should hike the bank rates. It may be awhile before they talk of a US rate hike.

At about a 5% discount to the USD, we think the Canadian dollar has some value. As always, manage your money.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.