Canada’s Economic snapshot: PMI Surge, Trade Deficit Widens, and US Trade Uncertainty
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Canada’s Ivey PMI rose to 15-month high in September
Canadian economic activity expanded at its fastest pace in 15 months in September, according to Ivey Purchasing Managers’ Index (PMI) data released on Tuesday. The seasonally adjusted PMI climbed to 59.8 from 50.1 in August,reaching its highest level since June 2024.This indicates economic expansion, as any reading above 50 signifies increased activity. A key driver of this growth was a rebound in employment, with the employment index rising to 50.2 in September from 46.0 in August. however,the price index saw a slight decrease,falling to 63.2 from 65.1. The unadjusted PMI also showed significant advancement, increasing to 61.6 from 50.0.
Falling exports caused Canada’s trade deficit to expand more than expected in August
Canada’s merchandise trade deficit unexpectedly widened to 6.32 billion Canadian dollars ($4.53 billion) in August – the second highest level on record. This was primarily due to a decline in exports, particularly to the United States and other regions. While exports initially benefited from adjustments related to tariffs earlier in the year, they have since fallen sharply, suggesting the long-term impact of U.S. President Trump’s tariffs is becoming apparent. Total exports decreased by 3% in August compared to July, while imports rose by 0.9%, marking the first decline in exports since April. In terms of volume, exports fell by 2.8%.
Stuart Bergman, chief economist at Export Advancement Canada, described the report as “weak” and a “pretty tough month,” emphasizing the gradual emergence of tariff impacts. Analysts had predicted a trade deficit of C$5.55 billion, up from a revised C$3.82 billion in July. Eight out of eleven export categories experienced declines in August, with forestry, industrial machinery, and metals seeing the largest drops. Exports to the U.S. fell to CAD 44.18 billion, a 3.4% month-on-month decrease, largely due to reduced unwrought gold exports, and also declines in lumber, machinery, and equipment. While Canada’s export share to the U.S. has rebounded to 73%, it remains lower than the 75% recorded in the same period last year.
Trump promised fair trade with Canada but did not commit to the US-Mexico-Canada Agreement
U.S. president Donald Trump stated on Tuesday that Canada would be treated fairly in trade negotiations regarding U.S. tariffs on Canadian goods, but stopped short of committing to the US-Mexico-Canada Agreement (USMCA). Prior to meeting with Canadian Prime Minister Mark Carney, Trump indicated Canada would “leave very happy” and assured fair treatment of the Canadian people. He reiterated accusations of the U.S.being “cheated” in trade and stated Washington would continue measures against certain Canadian exports.
Trump suggested the possibility of renegotiating or reaching a “more favorable agreement for each country,” prioritizing the best outcome for the U.S. while considering Canada’s interests. Carney has fostered a cordial relationship with Trump as becoming prime minister in March, initially seeking a separate trade and security agreement before shifting focus to the USMCA review. Trump acknowledged a good relationship and mutual respect with Carney, despite “natural conflicts.”
Given that 75% of Canada’s exports go to the United States, the country remains particularly vulnerable to U.S. trade policies. Trump also mentioned cooperation on a “Golden Dome” missile defense system. Canadian officials and analysts believe the likelihood of a comprehensive trade agreement with Trump is limited, and that ongoing negotiations are, in themselves, a diplomatic achievement for Carney.
Canada Watch: Economic Pressures, Trade Talks, and Global Tensions – October 8, 2024
Economic Overview:
Canada’s merchandise trade surplus reached a record high of 12.8 billion Canadian dollars. Though, the main stock market experienced a slight pullback on Tuesday, with the toronto S&P/TSX Composite Index falling 0.1% to close at 30,502.53 points, signaling cautious market sentiment. Sector performance was mixed, with consumer staples declining while technology and healthcare sectors saw gains. Upcoming economic data, particularly the Canadian jobs report, will be crucial for assessing the economy’s health and influencing the Bank of Canada’s monetary policy.
Political Data:
Canadian Prime Minister Mark Carney recently held talks with US President Trump to address punitive tariffs imposed by the United States on Canadian industries like steel, aluminum, and automobiles. while the meeting appeared cordial,with Trump promising to “treat Canada fairly,” underlying trade realities remain challenging. Trump reiterated the US’s desire for a trade agreement most beneficial to its interests, potentially through renegotiating the USMCA or pursuing a new bilateral agreement.
The Carney government faces significant pressure to resolve the tariff dispute, having already made concessions like eliminating some retaliatory tariffs and a digital services tax. However, this approach has drawn criticism domestically, with calls for a tougher stance from Ontario Premier Doug Ford and skepticism from opposition leader Pierre Poliyev regarding the trip’s potential for substantive results. Despite attempts to manage expectations, canada is navigating unpredictable US trade policies and growing domestic demands for stronger economic defense.
Geopolitical War:
The Russia-Ukraine conflict and the situation in Gaza remain major global geopolitical concerns. In Ukraine, a drone attack caused a large-scale power outage in the Russian-controlled Zaporozhye Oblast, while the potential supply of Tomahawk cruise missiles by the US to Ukraine has triggered a strong reaction from Moscow, with warnings of “serious escalation” if such a move occurs.
Negotiations to end the war in Gaza are at a critical stage in Egypt, considered the most promising yet for a breakthrough. hamas is calling for a permanent ceasefire, complete Israeli withdrawal, and comprehensive reconstruction, conditions that clash with Israel’s demand for Hamas disarmament, presenting a significant obstacle to progress.
GBP/USD Technical Analysis: Bullish Momentum and Potential Breakout (October 8, 2024)
This analysis examines the technical outlook for the GBP/USD exchange rate as of October 8, 2024, based on Bollinger Bands and the Relative Strength Index (RSI). The analysis suggests a bullish bias with potential for further gains, but also outlines key support levels to watch for potential reversals.
Current Market position & Momentum
The GBP/USD pair is currently exhibiting bullish momentum, supported by its position within the upper zone of the Bollinger Bands. This indicates buying pressure is currently dominant. The expanding Bollinger Bands suggest increasing short-term volatility, wich can present both opportunities and risks for traders.
The 14-period RSI is currently around 62.70, indicating strong momentum but remaining below the overbought threshold of 70.00. This suggests there is still room for the exchange rate to climb before encountering potential resistance from overbought conditions. The RSI is a momentum oscillator used in technical analysis that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. https://www.investopedia.com/terms/r/rsi.asp
Key Resistance and Support Levels
Resistance:
* 1.4020: The primary near-term resistance level. A breakout above this level could signal further bullish movement.
* 1.4160: A potential target for the exchange rate if the 1.4020 resistance is breached.
Support:
* 1.3855: The main support level. A break below this level could trigger a bearish reversal.
* 1.3735: A potential downside target if the 1.3855 support fails to hold.
Technical Structure & Potential Scenarios
from a technical outlook, the GBP/USD pair is poised for a potential breakout. If the exchange rate successfully breaks above the 1.4020 resistance, it is likely to test the 1.4160 level. However, traders should remain vigilant as a fall below the 1.3855 support could initiate a bearish trend, potentially driving the rate down to 1.3735.
Key Takeaways
* Bullish Momentum: GBP/USD is currently showing bullish momentum, supported by Bollinger Bands and RSI.
* Volatility: Increasing volatility,as indicated by expanding Bollinger Bands,requires careful risk management.
* Key Levels: 1.4020 and 1.4160 represent key resistance levels,while 1.3855 and 1.3735 are significant support levels.
* Potential Breakout: The pair is positioned for a potential breakout, but a break below support could trigger a reversal.
Disclaimer
This analysis is based on technical indicators as of October 8, 2024, and should not be considered financial advice. Trading involves risk, and it is indeed essential to conduct thorough research and consult with a qualified financial advisor before making any investment decisions.
Source: LaSalle Optivest (as originally provided)