Canadian Dollar Exhibits Volatility Following Housing Price Index Release
THE TAKEAWAY: Canada Housing Prices Lower But Meet Expectations > Consumer Demand Slowing > Canada Dollar Bullish
The selling prices of new homes in Canada rose in June according to economists, but the deceleration in the advance signals a possible slowdown in consumer demand. The Canada’s New Housing Price Index rose 0.3% in June compared with a 0.4% increase in May. The advance in June home selling prices met expectations of economists surveyed by Bloomberg News. On a year on year basis, the index rose 2.1% in June, surpassing the 1.9% yearly increase exhibited in May. The yearly print came in line with economists’ forecasts as well.
USD/CAD 1-minute Chart: August 11, 2011
Charts created using Strategy Trader– Prepared by Sonu Sadarangani
The USD/CAD had an interesting reaction to the data. The U.S. Dollar initially strengthened in the minutes following the release. This was likely due to better than expected jobs data released in the U.S. The U.S. Dollar quickly pared its gains and the currency pair was generally on a bearish trend but experienced significant volatility as its trended downward. The reversal following the initial strength of the dollar can be attributed to a disappointing U.S. Trade Balance print, indicating that the deficit continues to be concern for the United States.
Selling prices for new homes in Canada have been rising at an accelerating rate since March 2011. The recent drop to 0.3% from 0.4% a month earlier suggests that consumer demand may be slowing. The decelerated advance coincides with other weaker than expected fundamental data released in the past month. CPI data released in July shows that inflation is slowing in Canada. Recent GDP numbers came in below economists’ forecasts, indicating an overall slowdown in the Canadian economy. Canada May GDP (MoM) was expected to reveal an expansion in the economy of 0.1%, instead there was a contraction of 0.3%.
Written by Sonu Sadarangani, DailyFX Research
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.