The Canadians are expected to release their Consumer Price Index tomorrow 22 November 2013. The report will cover the figures from the previous month of October 2013. At this time, many experts believe that both the general CPI as well as the core CPI will show decreases in comparison to September 2013?s report.
Analysts note that these CPI reports are useful indicators for understanding the status of the economy, providing experts with an additional snapshot of how prices are affecting consumers. Additionally, economists use the CPI report to track inflation in the market, helping them to gauge which adjustments are necessary for promoting their inflationary goals.
It should be noted that the Canadian economy has struggled in recent weeks, due in part to both shifts in the US over speculation over if and how the Federal Reserve will take action on the $85 billion stimulus, as well as the low price of crude. Readers are reminded that Canada is a major exporter of the fuel and its economy is tied to it fairly closely.
Analysts do not believe that the release of this report will likely have any significant effect on the loonie. That said, some moderate level of volatility should be watched for following its release.
Analysis of FOMC Minutes Points to Tapering of Stimulus
The release of minutes from the recent meeting of the Federal Open Market Committee of the US Federal Reserve have pointed to signs that they may begin to taper the $85 billion stimulus program in the coming months.
Analysts note that the Fed has offered up a series of mixed signals in recent weeks regarding the future of the stimulus, with these minutes adding further confusion. Many of the comments emanating from the policy making arm of the Fed have pointed to the need for improvement on the unemployment rate before they would be prepared to make any cuts. Moreover, Fed Chair nominee Janet Yellen has voiced her doubts that the economy will be strong enough in the near future to withstand the withdrawal of the Fed?s funds. At the same time, the Fed continues to flirt with the idea of instituting the cuts as soon as possible so as to help boost the value of the USD.
Experts have pointed to concerns over the pace of growth in the American economy that may delay the implementation of the tapering. While there has been significant growth over the past six months, many economists are unsure of whether this pace can be maintained or expanded, and therefore be able to create the jobs that are needed for the FOMC to go ahead with its cuts.
Analysts believe that news that the Fed may move to start tapering earlier than previously expected will likely lead to volatility in the market. As such, the USD will likely enjoy a boost against its rivals, while the CAD, bonds and haven commodities like gold will probably suffer over the coming week.
Gold and Crude Continue to Suffer in Trading
It was reported on 21 November 2013 that both Gold and Crude continued to struggle in reaction to the news that the FOMC may move to begin tapering the $85 billion stimulus program. These losses heaped only further difficulties onto these two assets which have witnessed their value plummet in recent weeks.
For its part, the WTI reported trading close to a five month low, with little hope of letting up as it was reported that American stockpiles of crude had risen for the 9th straight week. Close observers of the energy market expressed concern that when the Fed begins to pull back from their involvement in bolstering the economy, that there could be a weakness in the market that could affect the crude industry as well. While these experts have expressed their concerns over scenarios of the day after the government cuts the stimulus, they do not believe that the pain will last over time should the economy be in fact strong enough to support the tapering.
Gold was another loser as it almost reached a four month low as investors digested the news from the Fed. As has been noticed in past reports, gold is a haven asset that often moves inversely with the US dollar. When traders feel that the dollar is headed for losses, they will generally move to assets like gold which are considered to have a more stable value. This has been seen numerous times in relation to speculation over the Fed?s timetable on the quantitative easing. However when it looks as if the dollar is on the rise, gold is sold off. Over the past year, gold prices have dropped by 26%, making it one of the worst years in 14 years. With the possible tapering of the stimulus, investors will likely flock to the dollar, dropping off their gold holdings, lowering demand and driving down prices.
Analysts assess that both of these commodities have a rough road ahead for them in the coming weeks. While further losses can be expected, traders are advised to watch for fluctuations and volatility.