- The Canadian dollar weakens for the sixth consecutive day, killing its highest level from late May with USD/CAD.
- US President Donald Trump has threatened 35% tariffs on Canadian goods that if no deal is made by 1 August, it has not been covered under USMCA.
- Canadian GDP contract in May 0.1% mother, To mark the second straight monthly decline.
Canadian Dollar (CAD) stays on the back leg for the sixth straight day against the US Dollar (USD) on Thursday, drowned at its weakest level since late May. At the time of writing, the USD/CAD pair is trading flat around 1.3834 during the initial US business hours, which is hovering near a fresh two -month high between the continuous greenback strength and vigilant risk emotion before the August 1 tariff deadline.
US President Donald Trump once again took shots in Canada on Thursday, warning that the new tariffs would hit Canada goods if a trade deal is not finalized by 1 August. Trump’s comments came after supporting Canada’s Palestinian kingdom, a step that he said “a deal is very difficult.” The proposed tariff will include 35% tax on Canadian exports not covered under USMCA, even with the required stator rates on major goods such as copper and pharmaceuticals. While the trade talks between the two countries continue, Canadian Prime Minister Mark Carney admitted that progress is slow and there is no possibility of a widespread agreement before the deadline.
Statistics Canada said on Thursday that in May the Canadian economy signed a contract of -0.1%, as measured by gross domestic product (GDP), corresponds to market expectations and marks the second monthly decline continuously, as goods-produced industries declined, while service-producing industries were essentially unchanged. The data comes a day after the Bank of Canada (BOC) decides to keep its policy interest rate unchanged at 2.75%. While the Central Bank said that overall inflation is close to its 2% target, it pointed out the underlying inflation pressures and the US trade policy and increasing uncertainty to the growing global stresses. BOC Governor Tiff McCalem hit a cautious tone, saying that the higher rate cut is on the table if the economy is softening and business related value remains under spike control.
In the US side, data released by the US Bureau of Economic Analysis added further support to Greenback. Core Personal Consumption Expenditure (PCE) Price Index, Federal Reserve’s favorite inflation gauge, 0.3% mother in June, corresponds to forecasts and accelerates the previous 0.2%. On an annual basis, the core PCE remained stable at 2.8%, slightly above 2.7%. Meanwhile, the headline PCE Price Index also climbed 0.3% mom and 2.6% yoy, by defeating both expectations, pointing to sticking the underlying value pressures.
Personal expenses increased 0.3% mother in June, slightly lower than expectations of 0.4%, but still marks a strong rebound with a decline of 0.1% in May. Meanwhile, individual income increased by 0.3%, beating the forecasts of 0.2% and rapidly overcome with a decline of 0.4% in the earlier month. In addition, the initial unemployed claims for the week came to 218k, slightly less than the expectations of 224K, one still pointing to the tight labor market.
