Week In FX Americas - Loonies Takes A Brief Flight

Includes: FXA, MXNS, UDN, UUP
by: Dean Popplewell

Canada released two conflicting data points at the same time on Friday – retail sales and inflation. The loonie briefly gained support from only one release and that was the news that Canadian January inflation topped expectations with the all item CPI annual rise at +1.5% from the December's print of +1.2%. Numbers like this should convince the market to quash any speculation, at least temporarily, that the BoC might be forced by the persistent threat of "disinflation" to ease o/n rates.

Aside from rate differentials, the CAD has remained under pressure outright this week mainly due to some M&A energy activity where copious amounts of the 'greenback' have been required to seal the deal. Not so good was the news that Canadian retail sales in December fell the most in 12-months – falling -1.8% to $40.19b. The market had been forecasting a -0.4% headline decline. Certainly not providing any extra support for the loonie was the previous monthly gain in November having to be revised down to +0.5%.

Even this year's list of disappointing US economic reports is finding it difficult to overthrow the dollar; the bulls continue to stick to their view that current data will not alter the Fed's economic outlook – all the bad is being blamed on the weather. The FOMC minutes this week focuses hard on the medium term outlook and with no deviation from Fed expectations should allow the ongoing of modest tapering.


* EUR eurozone Consumer Price Index

* USD Consumer Confidence

* GBP Gross Domestic Product

* CHF Gross Domestic Product

* EUR German Unemployment

* EUR German Consumer Price Index

* USD Durable Goods Orders

* JPY National Consumer Price Index

* EUR eurozone Consumer Price Index

* CAD Gross Domestic Product

* USD Gross Domestic Product

* CNY Manufacturing PMI