[DanRath]

Factory closure are likely to make a visit in the manufacturing sales data tomorrow. The Canadian trade balance earlier showed an improvement with exports showing clear gains as was the case in the US, giving a more positive light to global demand. The July housing starts disappointed with 132K with 145K expected, while the previous release was revised lower. Indeed the steepest drop was in Ontario indicating the weakness of manufacturing which tends to concentrate there. Previously, the Canadian labour market disappointed sharply relative to NFP helping USDCAD to retrace higher. This was not helped by a sharply lower Ivey PMI. Overall, rate differentials are unlikely to be the main determinant for USDCAD. Commodities though are likely to continue losing their USD base effect as the USD broadly strengthens. Lower commodity prices would tend to favour USDCAD would it only be that it increases real disposable income. On the other side, Canadian equities in this environment are likely to underperform given that they are more oriented towards commodities. The same argument can be made for European equities relative to the US.