Canadian Current Account Deficit Shrinks in Third Quarter

The Loonie was higher versus the USD after the Canadian current account balance posted a 16.2 billion deficit. The deficit shrank from last quarter’s 16.6 billion. The deficit was expected to improve after the CAD has depreciated against the USD in favour of the Canadian Trade balance. The flow of cross border investment was higher mining the effect of the weaker loonie on the current account. The Loonie has fallen 15.13 percent year to date versus the USD as monetary policy divergence expectation grows. Two rate cuts by the Bank of Canada and the anticipated rate hike from the Federal Reserve on December 16 have put downward pressure on the Canadian dollar as an even lower currency is needed to boost growth through exports.

The week in forex got off to a slow start on Monday after the U.S. Thanksgiving holiday last week shortened the number of trading days. The Bank of Canada, the European Central Bank (ECB) and the non-farm payrolls will kickstart the week that is expected full of announcements that will guide the price of the CAD.



On Monday the USD/CAD depreciated by 0.148 percent as the Loonie managed to drop below the 1.40 price line and end up trading at 1.3352. The Loonie could not outrun the drop in price of oil that gave back all the gains from the asian trading session to finish below $41 for the spot price of West Texas crude.



News of Russia crude upping production to counter Saudi price discounts that have already lost Sweden as a client as well as the lower than forecasted drop in U.S. production are two of the factors putting pressure on the price of the black stuff. Friday’s Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna could bring a production cut, but non OPEC members are signalling they are content existing with production levels and show willingness to keep pumping at current rates.

Canadian data will be plentiful this week, with indicators such as the monthly GDP girl and employment data as well as an appearance by the Bank of Canada that will try to talk down the currency after the new government has warned the market to expect a bigger deficit after lower growth forecasts. The BOC is not expected to cut rates and will look for the Fed to finally realize the interest rate divergence that has been promised for so long. Since the Fed December rate hike has been priced for so long, a token rate hike of 25 basis points to the Fed Funds rate is not expected to have a deep impact on the CAD and at this juncture the price of oil could put more downward pressure.

CAD events to watch this week:

Tuesday, December 1
8:30 am CAD GDP m/m
Wednesday, December 2
10:00 am CAD BOC Rate Statement
Friday, December 4
8:30 am CAD Employment Change
8:30 am CAD Trade Balance
8:30 am USD Non-Farm Employment Change
8:30 am USD Trade Balance
10:00 am OIL OPEC Press Conference

*All times EST

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.

Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stays near 1.0800 after upbeat US data

EUR/USD stays near 1.0800 after upbeat US data

EUR/USD stays under modest bearish pressure and trades near 1.0800 in the American session on Thursday. The data from the US showed that the real GDP growth for the fourth quarter got revised higher to 3.4% from 3.2%, supporting the USD and weighing on the pair.

EUR/USD News

GBP/USD stays in daily range above 1.2600

GBP/USD stays in daily range above 1.2600

GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth helps the USD stay resilient against its rivals and limits the pair's upside.

GBP/USD News

Gold pulls away from daily highs, holds above $2,200

Gold pulls away from daily highs, holds above $2,200

Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays above 4.2% after upbeat US data and makes it difficult for XAU/USD to preserve its bullish momentum.

Gold News

XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC

XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC

XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase. 

Read more

Portfolio rebalancing and reflation trades emerge into Q2

Portfolio rebalancing and reflation trades emerge into Q2

Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.

Read more

Majors

Cryptocurrencies

Signatures