Weekly Outlook: Further Indications Of Loonie Strength In Building And Employment

With mounting focus in recent weeks towards dollar fundamentals, the weeks Canadian data looks to lend little help in a breakout scenario on the pair.  Starting off the weeks docket will be the building permits report.  Dipping a whopping 10.6 percent in the previous month, consensus estimates are looking for a 2.3 percent rise in the figure.  This scenario seems more than likely as the dip in the month of April was seen as necessary following the sectors continued activity in recent months.  The morning report will be followed by the Ivey Purchasing Managers Index for the month of June.  Although dipping back to a 62.5 reading after jumping to a 75 in the previous month, the decline is not expected to lend an increasingly bearish bias.  Ultimately, the survey results are anticipated to remain above the 50 expansionary minimum compared to an earlier 55 reading in the month of April Additionally key components, both the employment and prices indexes are expected to be highlighted.  Finally rounding out the light week will be the unemployment rate report.  Estimated to be within line of last months report, the rate is expected to remain constant at a 6.1 percent clip.  This leads the consensus to continue in its assessment that the current labor market remains tight and the possibility of labor costs increases continue to remain high.  Should the net change rise to the estimated 15,000 positions, the market will be well positioned for a possible move lower on weaker dollar fundamentals as traders speculate on higher Canadian rates.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Comparably, the previous weeks data proved both thin and positive as bullish loonie traders were bolstered by further suggestions of inflationary pressures and in line gross domestic product.  The weeks figures continued to place emphasis on the possibility of further rate hikes in the ninth largest ecoomy as expansion doesnt seem to be abating after consecutive rate hikes already implemented by the Bank of Canada.  April gross domestic product figure was in line with the previous gain seen in March, rising 0.1 percent.  Although falling against the consensus 0.2 percent, the figure continues to purport growth in the economy.  The figure additonaly boosts the likelihood of an above 2 percent rate of annualized growth for the year.  The only other two releases on the week indicated further inflationary pressures as both industrial product and raw material prices rose above expectations. Industrial product prices increased 0.3 percent in the month.  Although lower than the 1.3 percent jump seen in April, the figure continues to be positive on higher commodity interest.  Raw materials didnt fare much better as the survey soared above the consensus figure.  Expected to increase at a 1 percent rate, the survey result bounced 5.6 percent higher.  The results are likey to feed into further price increases at the consumer level, making the upcoming central bank decision an interesting one.

Economic Releases for July 2 July 7