Canadian housing data points to modest expansion
This afternoon's housing data in Canada has returned some better than expected results to suggest some expansion ahead in the construction sector. Housing starts in September rose by 221.2k vs 217k expected, with August revised up to 226.9k. Along with this, building permits in August rose by 6.1%, much better than the 2.3% forecast.
However, we have seen (before) how some of the domestic data in Canada is having little positive impact on the CAD. Despite the fact that interest rates are at a relatively healthy 1.75%, there does not seem to be the same carry through in the currency as there has been with the USD. This is largely down to the forward-looking aspect as the Canadian economy will face contagion effects from any US slowdown, but the fact that USD/CAD has been confined to such a tight range inside 1.3150-1.3350 does suggest a lack of conviction in the meantime as traders wait to see a broader impact on the USD.
Since bouncing off the 1.3100 level at the end of July, USD/CAD has endured a frustrating 2 cent range since, and the market cannot seem to break this logjam, though we do sense that the upside is well offered and that only a major bout of risk-off here will seriously test levels closer to 1.3400 or beyond.
Nb, at the end of the week, we do get the latest employment report out of Canada, so this may prompt some decisive action, but for now, sideways trade looks set to continue.