USD/CAD: Canadian dollar rises ahead of fiscal update, BOC Review
The Canadian dollar continued to rebound against its US counterpart Wednesday, as the markets shifted their attention to the Harper government’s fiscal update ahead of the Bank of Canada’s biannual review.
The loonie, as the Canadian currency is known, climbed for a second consecutive day, hitting an intraday high of 0.8863 US. It would subsequently consolidate at 0.8852 US, advancing 0.34 percent.
The USDCAD pair fell to 1.1297. The pair is testing the initial support level of 1.1296. On the upside, resistance is ascending from 1.1382.
The loonie has gained nearly 1 percent over the past five days, rebounding from last week’s five-year low. The Canadian dollar has been under pressure as of late, as declining oil prices and a gloomy economic outlook have reminded investors Canada will operate below capacity for a while longer.
Canada had no economic data to report Wednesday, as the markets awaited the federal government’s fiscal update. Canada’s Finance Minister Joe Oliver said this week falling oil prices could weigh on the economy. According to Oliver, declining oil prices are impacting federal revenues, sparking concerns the Conservative government may not be able to eliminate the deficit next year.
Oliver maintained the federal government would still balance the budget next year, despite fragile commodity prices and a volatile global economy. Oil prices have declined by more than 25 percent since July, as supply has outpaced demand.
Bank of Canada Governor Stephen Poloz said last week that declining oil prices could shave a quarter percentage point off gross domestic product in 2015. Canada’s economy, which is expected to grow 2 percent to 2.5 percent next year, will operate below capacity for the next two years. In Poloz’s view, the economy needs to grow more than 2 percent annually close the gap between GDP and potential GDP.
On Thursday the Bank of Canada will release its biannual Review, featuring content related to the Canadian economy. The Review is closely monitored by the financial markets to gauge current trends in the Canadian economy, which can impact monetary policy.
The BOC has kept interest rates steady at 1 percent since September 2010. Weak employment growth, a declining export sector and weak international demand, particularly in the United States, have given policymakers plenty of scope to keep rates low over the years.
Although the BOC is not expected to adjust interest rates soon, analysts expect the next move will be a rate hike rather than another cut, as stronger US demand continues to bolster the Canadian recovery. Canadian exports reached a record high in July, as Canada posted its biggest trade surplus since the financial crisis.
Meanwhile, the labour market is showing signs of life following back-to-back months of job gains in September and October. Canadian employers added 43,100 workers in October, following a gain of 74,100 in September, Statistics Canada reported last week. The unemployment rate dropped to 6.5 percent from 6.8 percent, a nearly six-year low.
Compared to year-ago levels, overall employment increased 1 percent, with growth in September and October accounting for two-thirds of the gains.
Sorry. No data so far.