Canada: Growth rebound overshadowed by trade war – BBH

FXStreet Insights Team FXStreet

Brown Brothers Harriman’s (BBH) Elias Haddad expects Canada’s Q2 Real GDP to rebound strongly, outpacing the Bank of Canada’s (BoC) projection, with domestic demand and exports driving gains. However, the deepening US–Canada trade war and new 50% tariffs on about 0.85% of Canada’s GDP threaten this recovery. Haddad notes core inflation near target allows the BoC to hold rates, implying downside adjustment in CAD rate expectations.

Q2 GDP rebound faces tariff risks

"Canada’s economy is expected to recover in Q2 boosted by domestic demand and exports (Friday). Real GDP is seen rising 3.4% SAAR vs. -0.1% in Q1, which would be stronger than the Bank of Canada’s (BOC) 2.5% projection. Statistics Canada’s advanced July GDP estimate will also offer an early read on Q3."

"However, the worsening US-Canada trade war risk derailing the growth rebound. Tade talks between the two countries collapsed on Friday, triggering a fresh round of tariffs. 50% tariffs on nearly $20 billion in imports from Canada (0.85% of Canada’s GDP) kicked in on Saturday."

"The tariff applies to a range of products from wine to hockey sticks to cement. The tariff does not apply to energy, potash, products subject to tariffs under Section 232, and other goods like fish or critical minerals. Canada will match the new US tariffs dollar for dollar from September 8."

"Encouragingly, the BoC can afford to keep rates on hold to support economic activity because core inflation remains close to the 2% target. As such, there is room for the swaps curve (which implies 75bps of tightening in the next twelve months) to adjust lower against CAD in the near term."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD keeps the vacillating tone near 1.3650

GBP/USD struggles to extend its ongoimg recovery on Monday, this time flirting with the 1.3650 zone. Indeed, Cable trades without clear direction, although it manages well to maintain its business in the upper end of the recent range, challenging multi-week tops despite the decent recovery in the Greenback.

EUR/USD drifts lower to the 1.1670 zone

EUR/USD navigates a tight range at the beginning of the week, hovering around the 1.1670 region amid humble losses. The pair’s decline follows a decent advance in the US Dollar while investors continue to closely follow developments from the US money market.

Gold pushes harder; focus is now on $4,700

Gold keeps its bullish pace well and sound and approaches the $4,700 mark per troy ounce for the first time since early May. The precious metal’s move higher comes despite slight gains in the US Dollar and a modest pullback in US Treasury yields across the curve.

Here's what I learned trading meme coins

I’ve been trading cryptocurrencies for the past seven years, with meme coins becoming one of the most exciting and implacable parts of my experience. I love them because they represent internet culture and community sentiment, and, let’s be honest, extreme speculation. Newly launched meme coins were especially tempting: get in early enough, I thought, and a small bet could turn into a huge return.

Bessent’s presser in focus

Preview: Busy week ahead, with Bessent kicking this off today, with things wrapping up with Warsh at Jackson Hole. For a month that should have been a temporary period of ‘quiet’, we had anything but last week, with the bond market and tariffs front and centre.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.