Loonie Strengthens as Canadian Credit Easing Moderates in Second Quarter
THE TAKEAWAY: [Overall business-lending conditions in Canada ease in 2Q, though has moderated from 1Q] > [Continued easing credit terms for corporate borrowers and small businesses] > [CAD gains]
The Bank of Canada’s quarterly Senior Loan Officer Survey indicated that overall business-lending conditions in Canada eased during the second quarter of 2012, though the degree of easing has moderated since the first quarter. The survey’s balance of opinion rose to negative 10.8 in the second quarter from negative 16.9 the quarter prior, and marks the eleventh quarter of easing credit terms.
The survey, conducted quarterly, collects information on the business-lending practices of Canadian financial institutions, and in particular, gathers the perspectives of respondents on price and non-price terms of business lending. Readings above zero indicate tightening credit terms while figures below zero signal easing conditions.
Survey responses revealed that both price and non-price lending conditions had continued to ease across all borrower categories, most notably for corporate borrowers and small businesses, which saw easing conditions for the twelfth and seventh straight quarters, respectively. Competition among lenders was cited as the underlying factor in the easing of lending conditions. Meanwhile, a rise in demand for credit from financial institutions largely reflected increased financial requirements for mergers and acquisitions for corporate borrowers.
USDCAD 1-minute Chart: July 9, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
In the minutes after the survey results were released, the Canadian dollar climbed against the U.S. dollar, gaining as much as 13 pips from pre-data prices. At the time of this report, the loonie continued to gain ground, with the USDCAD pair trading at C$1.0196.
--- Written by Tzu-Wen Chen, DailyFX Research