These are stories Report on Business is following Monday, April 13, 2015.
The Canadian dollar is weak so far today, but here's some advice from Canadian Imperial Bank of Commerce:
If the loonie rallies Wednesday on the Bank of Canada's rate decision and monetary policy report, sell it.
The Bank of Canada is widely expected to hold its benchmark overnight rate steady at 0.75 per cent, but, as always, markets will be watching for signals from its statement and report, and from comments at a later news conference with Governor Stephen Poloz.
Here's how CIBC chief economist Avery Shenfeld sees it:
Investors are betting that Mr. Poloz and his colleagues will cut the key rate at some point this year, after January's surprise reduction of one-quarter of a percentage point.
But "the real odds are much less certain either way," said Mr. Shenfeld, whose economics department, in its latest forecast, still projected the Bank of Canada will sit tight throughout the course of the year.
"Our 1.7-per-cent real GDP forecast for the year will likely sit below the bank's revised projections, creating room for a governor who likes to fine-tune to justify another move," he said in a recent report, meaning CIBC projects the economy will expand at that pace in 2015.
"But there's a fine margin of error in that GDP call, and an extra couple of decimal places in growth could stay the BoC's hand."
But Mr. Poloz is counting on a pick-up in non-energy exports, which puts part of the focus on a weak loonie.
The Bank of Canada says it doesn't tinker with the exchange rate. But, of course, suggestions of, or speculation about, another rate cut would help drive the currency lower.
And that helps exporters because it makes their goods less expensive in the United States.
Mr. Poloz and his colleagues are "looking for non-energy exports to catch fire, and a competitive exchange rate is a key plank in that story," Mr. Shenfeld said in the run-up to Wednesday's decision.
"If the Canadian dollar rallies too hard on a view that the BoC won't cut, that would be the very fuel for a rate cut to become more likely," he added.
"So the trade right now is to sell the Canadian dollar if it rallies after a no-rate-cut decision next week, rather than to bet heavily on short-rate futures on either side."
The loonie could indeed rally on Wednesday. It could also fall, depending on what the central bank and Mr. Poloz have to say in the report and news conference.
At this point, said chief currency strategist Camilla Sutton of Bank of Nova Scotia, the Canadian currency is weak, as are some others, primarily because of the strength in the U.S. dollar.
Helping to spur that along are the latest, weaker trade numbers from China today.
But oil prices "seem to have reached their bottom," Ms. Sutton said, which should give the Bank of Canada "a lot of comfort."
Remember that January's surprise rate cut was what the central bank deemed "insurance" against the oil shock, though it said it expected the impact of the crude price plunge would be "front-loaded."
So all in all, Ms. Sutton said, the central bank is likely to strike a neutral tone on Wednesday.
"The Bank of Canada has little tolerance for a strong Canadian dollar," she said today.
"But at current levels, we're far from a strong Canadian dollar."
So far today, the loonie has moved in a fairly wide range, from a low of 79.08 cents U.S. to a high of 79.63 cents.
- David Parkinson in ROB Insight (for subscribers): Bank of Canada's pending policy report to hold clue's to rate's future
- Curse of the loonie: Up and down and 'back to where we started'
What to watch for
There's a lot of other stuff going on this week that will set the tone going forward.
On the economic side of things, as well as the Bank of Canada outing, are the Canadian Real Estate Association's measure of the housing market in March, and Statistics Canada's latest readings on inflation and Canadian manufacturing and retail sales.
"Over all, the data aren't likely to tilt the outlook much, with decent home sales and still-elevated core [consumer price index] offset by a still-soft trend in retail and manufacturing activity (even if small gains are expected for February," said senior economist Benjamin Reitzes of BMO Nesbitt Burns.
"The Q2 data are key for the policy outlook, and we won't be getting the bulk of those for another couple of months," he added, meaning the Bank of Canada's policy outlook.
This week also brings a raft of earnings from major companies, from banks to manufacturers.
Among them are JPMorgan Chase & Co., Wells Fargo & Co., Goldman Sachs Group Inc., Intel Corp., Johnson & Johnson, Netflix Inc., American Express Co., General Electric Co. and Honeywell International Inc., just to name a few.
As Scotiabank's Ms. Sutton noted, the focus of the markets will shift to the outlook for the second quarter, and earnings are key to that.
"U.S. corporate earnings are expected to decline for the first time in six years in the first quarter," noted analyst Jasper Lawler of CMC Markets in London.
"An earnings decline is hardly a welcome development, especially when P/E ratios of major indices are at decade-highs. However, the rally in U.S. stocks last week supports the idea that it may not be a disaster."
And – you knew this was coming – there's another key development expected in the latest Greek crisis because Athens is running up against a deadline to give its list of reforms to its euro zone neighbours.
"A deal is likely but it will be another band-aid," said Alvin Tan of Société Générale.
"Meanwhile the only casualty so far has been the euro, with global equities and bonds still happily running with the bulls."
- Follow our Inside the Market blog (for subscribers)
- Time running out on Greek debt talks, says top EU official
- Luke Kawa: 'Profit recession' looms ahead of U.S. first-quarter financial reports
Chinese exports fall
Those Chinese trade numbers, by the way, "finally disappointed in March … and then some," said senior economist Jennifer Lee of BMO Nesbitt Burns.
Exports plunged 15 per cent last month from a year earlier, while imports also tumbled.
"Beijing's brutal trade figures have sparked a sell-off in the mineral-related stocks, and the overnight announcement from China has set the pace for the growth figures that are due out later this week," said market analyst David Madden of IG in London.
"The collapse in China's trade balance on the month was so dramatic it left some traders wondering whether the figures were accurate, and other dealers viewed the dreadful numbers as a sign for further stimulus."
Streetwise (for subscribers)
ROB Insight (for subscribers)