Significant uncertainty for CAD - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that there is significant uncertainty over the Canadian economy owing to the number of various reasons.

Key Quotes

·         “Recovers from the slump in Q2 related to wildfires, and anticipates a fiscal bump from Childcare rebates in July and infrastructure spending later this year:

·         Awaits the USA election that poses risks for USA trade partners:

·         Deals with a slump in energy related investment that it hopes will bottom out towards the end of this year;

·         Looks for a recovery in the USA to help drive a recovery in exports and non-commodity investment in the coming years, and

·         Responds to increasing volatility in oil prices and OPEC’s efforts to come to an agreement to control to supply.

On Friday, core CPI inflation fell to 1.8%y/y in August below 2.0% expected, down from 2.1% in July, to a two year low (below the BoC’s 2.0% target).

On 7 September, the BoC acknowledged that on balance, “risks to the profile for inflation have tilted somewhat to the downside since July”, but were still hopeful that monetary policy could remain unchanged for some time.  It said, “The Bank’s Governing Council judges that the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate.”

The market will be eager to hear from BoC Governor Poloz later today, wondering if the recent soft CPI, retail sales, and softer USA activity indicators have moved the dial somewhat closer to a rate cut. As it stands, Canadian cash rates (0.50%) are already near record lows after two rate cuts in 2015 in response to the slump in oil prices; there is little expectation of a further cut in the near term.”