The Canadian dollar is mixed against a basket of currencies on Tuesday, driven primarily by housing data that pleased and displeased investors. The loonie is also waiting for the Bank of Canada (BOC)âs decision on interest rates this week that will either mirror its American counterpart or adopt a wait-and-see approach.
According to the Canada Mortgage and Housing Corporation (CMHC), housing starts surged 26% to 245,657 in June, beating median estimates of 210,000. This is the highest level since November 2017.
But Statistics Canada reports that the value of building permits declined 13% in May to $8.2 billion, down from a 16% surge in April. This is much lower than the market forecast of a 2.5% contraction.
Later this week, new housing prices will be released and the consensus is that they will be flat.
This will give the central bank more data to sift through as it makes a decision on interest rates. The market anticipates the BOC to leave rates unchanged at 1.75% on Wednesday. Policymakers have signaled that they will not move on rates until at least after the federal election in the fall, which would benefit the incumbent Liberals since the benchmark rate remains at historic lows.
That said, some analysts believe the BOC will allude to the loonieâs 4% appreciation, a trend that would amplify the pause on normalizing monetary policy. With household debt at an all-time high and an anemic economy that is depending on exports to spur growth, not too many are thrilled by the strengthening buck. Although the BOC typically refrains from discussing exchange rates, it might mention the strong loonie, though the central bank would likely attribute it to solid growth.
In the end, as Governor Stephen Poloz has said all along, any policy decision will be determined by the data, not a predisposition or sudden change to long-term trends.
The USD/CAD currency pair advanced 0.29% to 1.3136, from an opening of 1.3099, at 14:58 GMT on Tuesday. The GBP/CAD fell 0.17% to 1.6364, from an opening of 1.6391.
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