CAD Outlook and Strategy

Published on - June 2024

Navigating The CAD Landscape: Key Insights

  • Bank of Canada Interest Rate Cuts: In June 2024, the Bank of Canada cut its key interest rate by 25bps to 4.75%, responding to a decrease in the annual inflation rate to 2.7% in April. This decision aligns with the central bank’s expectation that inflation will continue to ease, necessitating further rate cuts. The Bank of Canada maintains a positive outlook on disinflation converging toward the target of 2%.

  • Economic Growth: Canada’s economy exceeded expectations in Q1 2024, growing by 0.4% against a forecast of 0%. This growth was driven by a revival in domestic demand and a sharp increase in retail sales, which rose by 0.7% in April. Despite this economic growth, high interest rates have dampened discretionary spending, weakening the housing market. Home prices fell by 0.2% in May, and home sales dropped by 0.6% from April.

  • Trade Balance: The trade deficit in Canada narrowed significantly to CAD 1.05 billion in April 2024 from CAD 2 billion in March. This improvement was due to a 2.6% rise in exports, particularly in energy products and unwrought gold, while imports increased by 1.1%. However, the current account deficit widened to CAD 5.4 billion in Q1 2024 from CAD 4.5 billion in the previous period, mainly due to a shift in the goods balance.

  • Unemployment and Wages: Unemployment in Canada rose to 6.2% in May, the third increase in four months, with 26,700 positions added. Despite this rise, hourly wages for permanent employees increased by 5.2%, higher than expected. The Bank of Canada’s move to a less restrictive policy has been cautious, considering the strong US labor data and rising wages in Canada.

  • CAD Outlook – The BoC’s dovish stance compared to the Fed is expected to weigh on the CAD. Short-term stability in USDCAD is anticipated, with a potential move toward 1.3900 in the medium term. CADINR is likely to range between 60-62.0 short-term, with a bias towards 61.00, and in the medium term, between 61.0-63.00, with a bias for 63.00.

Explore and Become our Client

Write to Us:

Call Us:

Contact Us
Please enable JavaScript in your browser to complete this form.
Name

At QuantArt Market Solutions Pvt. Ltd., we prioritize your privacy and aim to provide you with the best browsing experience on our website. By clicking ‘Accept,’ you are consenting to our use of cookies in line with our Privacy Policy. Your agreement acknowledges and complies with our approach to managing data and ensuring your confidentiality. Privacy Policy