CAD: Trade balance will improve to -CAD2.9bn in July – RBC CM

Adam Cole, Head of G10 FX Strategy at RBC Capital Markets, suggests that Canada’s July trade data are another critical release as a barometer of the growth rebalancing toward non-oil exports that the BoC continues to expect.

Key Quotes

“Our economists forecast the trade balance will improve to -CAD2.9bn in July (consensus –CAD3.3bn) after a record low nominal balance of -CAD3.6bn in June. This report will be the first possible sign of a rebound in exports that the BoC expects in Q3 (based on the July MPR). We look for a 1% increase in export volumes, a partial reversal of recent export weakness (volumes down for five consecutive months, a cumulative 9.6%). Non-energy export volumes were down 4.7% y/y in June and will need to match the 1.9% m/m gain in July 2015 just to maintain that (weak) level. With ~1% expected decline in import volumes, the real trade balance is expected to improve by CAD0.9bn to CAD1.3bn.”