At the start of the week, Canada reached out to the World Trade Organisation to try to force China’s hand into justifying why it has banned all Canadian canola shipments for the foreseeable, having claimed it is contaminated.
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Fearing this could be the start of quite a worrying trend, Canadian ambassador De Boer has asked for an open investigation and called upon China to provide clear proof of their claim. Rumours are circulating that Maple syrup and Canadian seafood could be next to be locked out of the enormous Chinese market.
As a commodity-based currency, any hit to Canada’s export market is likely to have serious repercussions to the value of the loonie in the eyes of investors. Having been through a fairly lacklustre start to the month of May, this week’s news of yet another face off with China is unlikely to help the Canadian dollar fall back in favour with the markets.
Yesterday afternoon’s strong new home builds release did fairly little to help bolster Canadian dollar exchange rates. The big uptick compared to last month’s release once again highlighted the dynamism behind the Canadian housing market and indeed the economy as a whole. It was another step in the right direction and goes some way to justify the loonie’s gradual rise against the pound this week, having just pushed the GBP/CAD interbank rate back below 1.75 and marking a considerable change in trend from the start of the month.
Importantly, today’s new housing price index release is due. Because it is released by Statistics Canada, it will likely hold more weight with investors and so we could see yet more support for the loonie if this release follows suit. Prices have been stabilising since the end of last year, so it will be interesting to see how the markets react.
As far as long term loonie strength goes however, Friday will provide the first real test of the month to the Canadian dollar, with key employment figures taking centre stage. Throughout last summer, when the Canadian dollar seemed to be picking up all the plaudits with favourable rate hike projections and oil production caps propping up prices, net employment in Canada jumped significantly and helped the CAD build a fair amount of support.
Since the final quarter of last year however the trend has reversed slightly, which has brought the number of new jobs created into the spotlight. As a result, those in the market for Canadian dollars may want to plan around Friday afternoon’s releases.
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