The Canadian economy has been performing relatively well of late, with business investment recovering, trade concerns easing, and consumer spending continuing to rise. However the future for the Canadian economy and therefore the value of the Canadian dollar is a cause for concern among investors, as two of Canada’s largest export areas, oil and automotive, threaten to slow down its recent economic expansion.
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It was announced on Monday that General Motor Co. has planned to stop automotive production from its plant in Oshawa after December. As this was once one of the largest manufacturers in Canada operating for over 65 years, this closure could cause a huge blow to the economy. The closure would impact 3,000 workers, and economists have estimated that this could affect growth by 0.2% per year. However the biggest concern is that this could push other companies to follow the same path and even impact the auto-parts sector too.
The price of Canadian crude oil has also been on a downward trend since May, with prices falling by over 60%. Energy and Automotive makes up almost a quarter of Canadian exports. This news has caused the CAD to weaken over the course of this week, however Brexit headlines have allowed the Canadian dollar to regain some of its losses against the pound.
The United States-Mexico-Canada (USMCA) trade agreement is due to be signed today, however up until yesterday the details were still being finalised. I would expect some CAD strength following the signing of this agreement, as uncertainty over Canada’s trade arrangements has been weighing heavily on investor confidence. Getting in touch with your Account Manager today can allow us to alert you of any rate movements in your favour.
This afternoon at 13.30 will see the release of the third quarter Gross Domestic Product figures which are expected to fall from 2.9% in the second quarter, to 2%.
This is still seen to be strong economic growth and is in line with the 2.2% noted in the first half of this year, however any deviation from this could result in swings on CAD rates.
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