Canadian Dollar Shrugs Off Strong Ivey PMI Data, USD/CAD Jumps as Oil Tanks
KEY POINTS IVEY PMI:
- Canada’s Ivey Purchasing Managers Index rises to 71.9 from 64.7 and expands for the fifth consecutive month
- The strong results suggest the economy maintains momentum as we enter the second half of the year
- USD/CAD rises following the PMI report, but the move seems related to a large drop in oil prices and some risk-off sentiment
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Ivey Purchasing Managers Index (PMI) data showed that economic activity accelerated and expanded at a robust pace for the fifth consecutive month in June in Canada. According to a survey released this morning, PMI rose from 64.7 to 71.90 last month, a sign that the recovery is gaining momentum as the economy opens up thanks to increased Covid-19 vaccinations.
As a reminder, the Ivey PMI is a weighted index developed to measure the month-to-month variation in economic activity as indicated by a panel of purchasing managers from the private and public sector. When evaluating the data, any print above 50 indicates an expansion, while readings below that threshold signal a contraction in output.
On the component side, the employment gauge spiked to 69.6 from 67.00, while inventories ticked higher to 65.4 from 65.3. Meanwhile, deliveries recovered moderately and rose to 37.9, but remained below the 50 mark, indicating that firms are struggling to meet pent-up demand.
The table below summarizes key results:
Source: Ivey Business School
USD/CAD AND WTI 5-MINUTE CHART
Later in the day, traders will focus on the FOMC minutes and, of course, oil price dynamics, while on Friday the Canadian employment report for June will be the center of attention. Investors expect payrolls to rise sharply by 175,000 after a loss of 68,000 jobs in May. The unemployment rate is seen as declining, but is unlikely to fall significantly as the labor force participation rate is poised to rebound from an eight-month low in May. In any case, a good jobs report could strengthen the case for further QE tapering by the Bank of Canada at its next policy meeting next week. This scenario could boost the Canadian dollar against the greenback.
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---Written by Diego Colman, DailyFX Market Strategist
Follow me on Twitter: @DColmanFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.