Canada’s GDP growth is now projected at 1.70% from a prior 2.10%. Inflation remains consistent, with December headline and core consumer prices at 2% and 2.30% (prior figures: 1.70%). The labour outlook remains highly constructive. Hourly earnings have taken off since a November 2018 downtrend, up 1.80% in January while the economy built 67,000 jobs in the same period. The recent bounce in oil prices from December is good for Canada’s trade balance. It benefits from OPEC’s price hike and Saudi Arabia’s output cut, but also from USA’s oil import sanction against Venezuela, as US refiners are willing to substitute it with Canadian heavy crude.
Following January’s Bank of Canada’s (BoC) meeting, which decided to maintain its key rate at 1.75% for the second consecutive time, the loonie is holding up against the greenback. Under current settings, we expect the Canadian economy to stay robust and the BoC possibly to hike its rate by December 2019. USD/CAD’s drop from yesterday might be over, as optimism for resolution of the Sino-American trade dispute builds. However, risk of a US government shutdown by Saturday looms. Currently trading at 1.3225, USD/CAD is heading along 1.3255 short-term.
By Vincent Mivelaz