Forex: A look at what could move the Canadian dollar

By Alan Zibel. Matthew Kramer/Getty Images

TORONTO — A report that the Trump administration is considering proposing new tariffs on about USD 20 billion worth of Canadian exports pushed the value of the Canadian dollar to six-week lows against the U.S. dollar Monday, while bond yields fell.

Here’s what to watch in the Canadian business world in the coming week:

Loan conditions

The U.S. Commodity Futures Trading Commission reports Friday on the weekly contracts placed on the Toronto Stock Exchange, following on the heels of the country’s biggest stock index, which hit a record high Friday with a 4.5 per cent gain for the day. The index for the entire month of August finished up 2.2 per cent, after the previous record was set in July at 2.6 per cent.

Canada Mortgage and Housing Corp. reports Wednesday on the housing market. After huge gains in the past two years, the housing market in Canada has been cooling off as mortgage rates have risen. Also on Wednesday, Statistics Canada releases the country’s national account and gross domestic product figures. Home sales have been falling in Canada. Economists are looking for sales to decline 0.1 per cent in July compared with June. Gross domestic product numbers are expected to be the same.

Finance Minister Bill Morneau delivers his fall fiscal update on Thursday, but economists aren’t expecting any major announcements. He’s said his fall update would be a more fiscally conservative offering than the spring fiscal update that featured tax cuts and the Canadian Forces paying back the feds $875 million in missed interest payments over the last 10 years.

Stocks vs. Treasuries

The TSX is off to a strong start for the year, up 7.2 per cent, compared with a 4.4 per cent gain in the S&P 500. Bonds haven’t performed so well, with yields on 10-year Treasuries up 0.5 per cent since the start of the year. The yield on the three-month T-bill closed Monday at 0.174 per cent, unchanged from a week ago and from two weeks ago.

Currency markets will watch U.S. Treasury yields and the trade situation as well. The Canadian dollar has weakened about 2 per cent against the U.S. dollar since the trade war heated up and took down other commodity currencies like the Australian dollar. On Monday, the loonie closed at 75.3 cents US, after earlier falling to 75.2 cents, the lowest level since July 22.

The loonie could weaken further ahead of a speech Tuesday by Bank of Canada Governor Stephen Poloz, which is widely expected to offer few hints about interest rates.

U.S. home sales report

The U.S. Census Bureau and the Department of Housing and Urban Development release their July U.S. home sales report on Wednesday. Home sales rose in June. Economists are looking for July sales to rise 0.1 per cent, according to FactSet. However, there are signs that the housing market is slowing. Starts fell 0.8 per cent in June after rising sharply in May. The Washington Post reports that sales of new homes are about 2 per cent below the same time last year.

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