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"Will Carney consider raising rates or not?? "..
"B.O.C. may be forced to send a price signal to consumers in the form of another rate hike"
The threat of a renewed slowdown in the United States and slowing momentum for the Canadian economy has the Bank of Canada nervous
about its next move. But despite heightened expectations that the
central bank will pause at its next meeting, potential housing
regulation and the next round of employment data may influence the
decision.
After two recent increases to its overnight rate, Bank of Canada
governor Mark Carney on Thursday reiterated that “financial conditions
remain exceptionally stimulative.” He also warned that while Canada’s
situation and the inflation target dictate a different policy stance
than in the United States, “there is a limit to this divergence.”
Stéfane Marion, chief economist and strategist at National Bank
Financial strongly agrees, but wonders what the actual of divergence is.
Despite Mr. Carney’s words of caution on the short-term outlook,
there was also the recognition that “historically low policy rates
create their own risks.” Mr. Marion noted that Canadian households have
been running a net financial deficit for 37 consecutive quarters, and
Mr. Carney acknowledged that the current situation in which investment
in housing is outstripping total savings cannot continue.
But how do you stop this when the economy continues to create jobs and home affordability remains near an all-time high?
Mr. Marion says unless the Department of Finance introduces a more
stringent set of rules for access to housing, the Bank of Canada may be
forced to send a price signal to consumers in the form of another rate
hike.
So despite Mr. Carney’s dovish statements, the economist is still
uncertain about the outcome of the Bank of Canada’s next meeting. In
fact, Mr. Marion suggested that the next jobs report could be the
clincher.
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"CIBC warns of a 'Gold bubble'.."
"It's hard to see gold could be soaring on fears of U.S. inflation.."
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Gold is slipping somewhat today, though still hovering near its record amid
projections of a run to even greater heights. Gold’s outlook is being
driven by mounting concerns over a U.S. slowdown. Traditionally, gold
is a hedge against inflation, though prices are surging despite the
fact that inflationary pressures are nowhere to be seen.
“What has the gold bugs so excited these days? Everything and
anything,” CIBC World Markets economist Avery Shenfeld said in a recent
research note. “So many of the traditional correlations to the gold
price are breaking down that it’s hard to discern what’s moving the
yellow metal to new heights. Even we’ve caught the fever, having
recently nudged our 2011 target a bit higher to U.S. $1,400.”
It used be that fears of inflation were primarily behind a rise in
gold, Mr. Shenfeld said, pointing to research that suggest some of the
best time for prices were in times of deflation.
"It's hard to see how gold could be soaring on fears of U.S. inflation,
given where the CPI now sits, and with rock bottom long Treasury yields
suggesting bond market players are counting on low inflation forever."
Here's Mr. Shenfeld's warning: "Maybe the new golden rule is simply
to buy gold willy nilly, because everyone else is. If that's the only
real logic, gold risks becoming a bubble that will burst down the road.
So for investors piling in today, the key is to discern what could
break the back of what looks to simply be a join-the-bandwagon run."
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| Currency Commentary
EUR, USD, CAD, GBP & JPY
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EUR: The Euro has opened European session wrong footed and losing ground
against most currencies. EUR/USD retreat from 1.3800, 6-month high hit
on early Asian session, has extended to session low at levels below
1.3700.
USD: Long-term US debt is rallying on safe-haven appeal as overall market
sentiment remains fragile on Monday. So far the benchmark 10-year note
is up 12/32 dragging the yield to 2.472, while the 30-year bond is up a
solid 25/32 pressuring the yield to 3.676.
Speculation of
further Fed quantitative easing measures are spreading through the bond
markets, following lackluster US manufacturing data to end last week.
Bond traders will be on high alert for further fundamental data this
week which will give hint into the possibility of further bond-buying
measures by the bank. In particular, today will see the release of US
durable goods orders while Friday the Department of Commerce will
unveil non-farm payrolls for September, giving hint into the health of
the labor market.
CAD: Once again commodities performing well, shortly key U.S. data coming out that will cause further movements for the USD/CAD.
Will we see the USD/CAD break into the lower 1.0100 levels and can this bullish trend continue? Expected range for today..
GBP: The Pound has shrugged off weakness seen on early European session, and
supported by 1.5750, the pair is bouncing up strongly regaining 1.5800
area to break above 1.5825 and hit session high at 1.5845.
JPY: The Dollar rallied on early Asian session, to cap at 83.85, and the
pair gave away gains on European trade to re-visit post intervention
low at 83.15, aiming to revisit year to date low at 82.85.
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| Technical Ranges
CAD, USD, EUR, JPY & GBP
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 USD/CAD
Support: 1.0145 Resistance: 1.0255
CAD/JPY
Support: 80.96 Resistance: 82.18
EUR/CAD
Support: 1.3847 Resistance: 1.4139
EUR/USD
Support: 1.3602 Resistance: 1.3778
GBP/USD
Support: 1.5749 Resistance: 1.5895
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| Main USD/CAD data today: |
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1. USD- Factory Orders & Pending Home Sales data.
CAD - No relevant data.
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