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Financial Markets weekly newsletter

Posted on: February 10, 2017

The stats sheet

  • 3 mos CDOR – .956 bps
  • 2 year GOC bonds - 0.78%
  • 5 year GOC bonds - 1.09%
  • 10 year GOC bonds –1.71%
  • 3 mos US libor - 1.033
  • 5 yr Treasuries - 1.88%
  • 10 yr Treasuries - 2.41%
  • USD/CAD – 1.3075
  • EUR/CAD – 1.3900
  • CAD/JPY - 86.80
  • GBP/CAD – 1.6310

Canadian News

Literally the only story in town this week has been the employment report that was released one hour ago. The details—hot off the press—are:

  • Unemployment rate– 6.8% (versus 6.9% expected)
  • Net change in employment- +48k (versus expected 10k decline)
  • Full time/part-time jobs- +16k/+32k
  • Participation rate– 65.9% (expected 65.8%)

The mix of the report is uneven–with the majority of the jobs in business and financial services (yay us!!), hours worked actually fell, and average earnings only rose 1% y-o-y (the slowest rate since 2003).

So, Gov. Poloz appears spot on when he talks of slack in the Canadian job market (job creation is mixed and demand isn’t pushing wages higher) as a main focus and driver of the BOC loose monetary policy. But after a 70k job gain in December, this number suggests we are working pretty hard on the problem. Expect the BOC to stay on high alert to downside risks in our economy, but I’m not convinced that they are losing any more sleep than usual.

US News

Another surprisingly quiet week in US financial markets-with market participants getting chopped up in a 15 point range. On the whole, short positions have been squeezed as the market got concerned that President Trump was speaking solely about matters “non-economic.” Had he forgotten all those bullish promises that he made on the hustings? Was he distracted by nomination process filibustering and the travel ban controversy?

Just as it looked like we could see some fantastic levels to start putting on some great liabilities, the President mentioned that “tremendous” tax reform was coming in a matter of weeks. This has excited the market and lead to a sell off –folks were presumably expecting “great, great,just really really great” tax reforms, and so tremendous ones are a huge upgrade.

Seriously though, the market needed to hear that a lot of the economic reforms that lead to such bullishness are on the way. And it will need to continue to hear it. Not sure that twitter is the right forum for that–so there is work to be done.

Currency News

A choppy week on the currency front. Again, positions getting squeezed on the lack of any real or definitive news. Dollar weakness started the week, with international confrontations and the senate approval for the cabinet turning in to a headline making machine, but has given way to strength on the economic reflation trade that is imminent tax reform.

The loonie has been in a 1.3000 – 1.3200 range as a result, and we currently sit slap-bang in the middle of it. The longer we do not test resistance back up at 1.3350-1.3400, the more likely a sustainable run below 1.3000 appears reasonable.

The Canadian dollar is in great shape against pretty much every other currency in the world as it benefits from being part of the dollar block-but it hasn’t yet gained significant ground against the greenback, likely because monetary policy will continue to diverge, but also because we still don’t know how the new administration will look upon Canada. What will a renegotiated NAFTA look like? A few clues may come our way on Monday, when our PM meets the President. Will he get the May treatment? Or will he get “Turnballed?” If we can navigate a new NAFTA successfully in the coming months, our dollar could do very well.

We at Financial Markets remain, as ever, All In.

Mark Johnson
Director, Financial Markets-Interest Rate Sales



Most Recent Market Updates

November 20, 2017

Natural gas gains 4.4 cents

NYMEX natural gas climbed 4.4 cents higher on Friday.

November 20, 2017

Crude gained $1.41

Crude prompt futures gained $1.41 on Friday to close the day at $56.55.

November 17, 2017

Natural gas falls 2.7 cents

NYMEX natural gas continued it’s decent on Thursday.

November 17, 2017

Crude prices slide $0.19

Crude prompt futures traded in a 69 cent range.

November 17, 2017

USDCAD range bound as Canadian CPI uneventful

Domestically we saw the biggest release of the week a few minutes ago.

November 14, 2017

Natural gas loses 5 cents

Cold weather emerged over the long weekend in the US Midwest to East as anticipated.


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