Welcome to Extreme Investor Network, where we provide unique insights and analysis on the stock market, trading, and Wall Street. Today, we are diving into the recent developments in Canada’s economy and what it means for investors.
Last week, Statistics Canada released data showing that CPI inflation in Canada cooled to 1.6% (YoY) in September, its lowest rate since early 2021. The decline was primarily driven by a drop in gasoline prices, which tumbled 10.7% in September from a decline of 5.1% in August. Despite this, CPI Median and Trim measures remained unchanged, averaging 2.35% in September.
On the jobs front, employment numbers exceeded expectations, with Canada adding more than double the number of jobs in September compared to August. Full-time employment change saw a significant increase of 112,000, marking its largest gain since mid-2022. Additionally, the unemployment rate ticked lower to 6.5%, although it remains higher than this time last year due to increased immigration rather than job losses.
GDP growth for Canada expanded by 0.2% in July, but August’s growth was estimated to have stalled. Economists are forecasting that Q3 24 growth will fall below the Bank of Canada’s estimate of 2.8%.
The Bank of Canada is set to make a decision on interest rates this week, with a 50 basis point cut already priced in by the markets. This is largely due to subdued sentiment revealed in the BoC’s Business Outlook Survey for Q3 24 and lower-than-expected economic growth. Some analysts are calling for a smaller 25 basis point reduction based on slight improvements in the labor market and GDP growth.
In light of the need for accelerated economic growth to control inflation, Governor Tiff Macklem suggested that a larger rate cut may be necessary. Investors will be closely watching the rate decision, accompanying statement, economic forecasts, and the press conference for insights into the Bank of Canada’s future monetary policy.
What does this mean for the Canadian dollar this week? A 25 basis point rate cut could lead to an unwinding of CAD shorts in the market. Technically, the USD/CAD pair is up 2.0% month to date and could continue to rise towards monthly resistance at C$1.3945. However, daily resistance at C$1.3795 may provide a ceiling, with a break above opening the door to daily resistance at C$1.3866.
Stay tuned to Extreme Investor Network for more expert analysis and market insights to help you navigate the ever-changing landscape of the stock market and trading world. Happy investing!