Statistics Canada announced its report on trade balance on Tuesday. As per the report, Canada’s trade gap was reported to have widened further to $1.1 billion in November. Much of the expansion was attributed to a rail strike that lasted for many days and caused disruption in the transportation of crucial goods. Following the report, the strength of Canada’s economy has once again come under the lens.
In a previous estimate, economists had capped Canada’s trade deficit at $0.8 billion for November. In October, after revision, the figure was recorded at a much larger $1.6 billion. Statistics Canada’s report on Tuesday revealed the November’s trade deficit to have contracted as compared to that of October, but the extent of contraction failed to align with what the analysts had expected.
USD/CAD Hiked From 1.2960 To 1.3028 Following The Economic Data
The trade deficit report was the major market mover for the USD/CAD currency pair on Tuesday. The pair continued to dwindle lower at around 1.2960 level in the early session. Following the release of the economic data, however, the pair gained significantly and was last seen trading as high as 1.30284. The sharp increase in USD/CAD, however, was also linked with the better than expected expansion in the U.S services PMI for December.
Canada’s economy has been the talk of the financial markets as it has been hit with a series of worse than expected economic data in the past few weeks. The weak economic data has once again stirred the discussion of the pros and cons of the Bank of Canada to consider a rate cut in the upcoming months.
While much of the worsening in trade deficit was attributed to the rail strike, combining it with the poor figures for manufacturing sector, retail sales, and employment scenario, that were revealed in the past few days makes it harder for the economists to not consider the option of adding more stimulus to boost the Canadian economy.
Canada’s Export Volumes Excluding Precious Metals Dropped To 4.3% In November
The report on Tuesday further highlighted that Canada’s export volumes (excluding precious metals) dropped steeply to 4.3% in November that marked the sharpest monthly decline in over a decade. In terms of gold and crude oil, however, Canada noted an all-time high for shipments to the United Kingdom.
On imports front, Canada recorded a decline in 10 out of 11 categories in November with a total drop of 2.4%. With the U.S, Canada saw its trade surplus narrowing to $4.2 billion in November while the trade deficit with China constricted to $1.9 billion.