All Focus Set on Canadian Retail Sales Release
- Canada will release Retail Sales this Friday
- US President Trump looks set to approve key Hong Kong bill
- US-Mexico-Canada deal is key
Bank of Canada (BoC) Governor Poloz said that global conditions have eased a lot and that the bank has monetary conditions “about right”. These comments were looked at as “hawkish” by the markets, which gave strength to the Canadian dollar. The BoC has room to maneuver in the upcoming weeks. For now, the major catalyst to push the price could be the ratification of the United States-Mexico-Canada agreement and Canadian Retail Sales.
Vital Canada-US-Mexico agreement
Canada will release Retail Sales data this Friday and market expectations are for sales to have risen 0.2% in September after falling -0.1% in August. It is also important to mention that the ratification of the United States-Mexico-Canada agreement has also a very big influence on the Canadian economy.
The passage of this agreement would be excellent news for both the Canadian dollar and the Mexican peso. If this were to happen, the BoC would probably be more “hawkish” moving forward.
The Canadian dollar was pressured by the dovish stance of the BoC. That cut its domestic and global growth forecasts, but this could change soon. According to the latest news, US politicians prefer stronger enforcement mechanisms in the pact. Still, they are hopeful that they can get issues resolved.
The situation in the United States is quite good and the Fed members said this week that they support a monetary pause. After the 25bps cut at the last meeting, they have concluded that the monetary easing was enough to support growth.
The Fed’s future actions will depend on economic data, but the US economy is expected to grow at 2.3% this year whereas it still forecasts a slowdown to 2% in 2020 and 2021.
It is also important to say that the global GDP is expected to grow by 2.9% this year. This is the slowest pace since the financial crisis.
The financial markets are pressured at the end of this trading week. President Trump looks set to approve a key Hong Kong bill which could hurt US-China relations and raise the possibility of another economic downturn.
Background noise and conclusion
The BoC cut its domestic and global growth forecasts at its latest meeting, but with the passage of the United States-Mexico-Canada agreement, it could change its policy. The US policymakers have agreed that the rate cut was appropriate, saying this was also connected with the global situation.
According to the latest news, China had invited US negotiators to meetings in Beijing. However, the Hong Kong bill may anger the Chinese, who are closely watching the events.