CAD bullish structure
The fundanental outlook for the CAD is mixed
Al time low interest rates
The Bank of Canada left its benchmark interest rate unchanged at the effective lower bound of 0.25 percent on July 15th 2020, as widely expected. The Committee said that it will continue its quantitative easing program with large-scale asset purchases of at least CAD 5 billion per week of government bonds. Policymakers noted that the Canadian economy is starting to recover amid the easing of coronavirus restrictions but added that the outlook is extremely uncertain given the unpredictability of the course of the pandemic. The Bank expects the economy’s recovery to slow as the outbreak continues to have an impact on confidence and consumer behaviour. Policymakers projected that the real GDP will likely shrink by 7.8% in 2020 and resumes with growth of 5.1% in 2021 and 3.7% in 2022. The Committee added that is prepared to provide further monetary stimulus as needed to support the recovery and achieve the objective
Consumer prices in Canada rose 0.7 percent year-on-year in June 2020, following a 0.4 percent fall in May and above market expectations of a 0.3 percent gain. It was the biggest increase in consumer prices since March 2011, as cost of transport rebounded (0.1% vs -3% in May), as gasoline prices dropped at a slower pace for the second successive month (-15.7% vs -29.8%) mainly due to higher demand amid the gradual reopening of businesses and public services and a general rise in local travel. Also, prices increased further for shelter (1.7% vs 1%); and alcoholic beverages, tobacco products & recreational cannabis (0.6% vs 0.2%). Additionally, cost decreased less for clothing & footwear (-2.6% vs -5.4%) and recreation, education & reading (-1.4% vs -2.6%). On the other hand, prices slowed for food (2.7% vs 3.1%); and health & personal care (0.5% vs 0.9%). On a monthly basis, consumer prices went up 0.8%, the most since January 2017, following a 0.3% rise in the prior month
Massive recovery in oil prices since oil prices dropped below 0 dollars per barrel, this should filter out to be positive for CAD as OIL contributes massively to the Canadian economy.
The unemployment rate in Canada dropped to 10.9 percent in July 2020, easing further from April’s record high of 13.7 percent and compared with market expectations of 11 percent, as people continued to return to the labor market amid the easing of coronavirus- induced lockdowns restrictions. The economy added 418.5 thousand jobs, above forecasts of a 400 thousand gain, due to both full-time work (73.2 thousand) and part-time employment (345.3 thousand). The labour force participation rate went up to 64.3 percent from 63.8 percent in the prior month. The youth unemployment rate declined to 24.2 percent from 27.5 percent in June.