The greenback gained ground against the loonie yesterday following the release of upbeat US GDP data for the June 2024 quarter. The US dollar’s momentum was also aided by weak Canada’s current account data for the same period. Overall, the USD/CAD pair rose from a low of 1.3463 to a high of 1.3496 in the past 24 hours.
According to Statistics Canada, the country’s current account deficit widened to C$8.50 billion in the June 2024 quarter from C$5.40 billion in the previous quarter. Economists had anticipated a deficit of only C$6 billion.
The increase in trade deficit was an outcome of a higher goods deficit coupled with a decline in the investment income balance, partly negated by a lower services deficit.
Specifically, the goods and services deficit was C$5.40 billion in 2Q 2024, up C$1.10 billion from the March 2024 quarter. Imports of goods rose significantly compared to exports of goods.
Canada’s goods deficit was C$2.20 billion in the June 2024 quarter, an increase from a slight deficit in the previous quarter. The services deficit narrowed to C$3.20 billion in 2Q 2024 from C$4.30 billion in 1Q 2024.
Imports of goods grew by 2% q-o-q in the June 2024 quarter to C$196.10 billion. Imports of motor vehicles and parts increased by 5.30% in the same period. Imports of metal products rose by 8.10% to C$16.10 billion. However, imports of energy products fell by 13.50% q-o-q in the June 2024 quarter to C$9.20 billion.
Exports of goods inched up 0.90% q-o-q in 2Q 2024 to C$139.90 billion, primarily due to a jump of 12.70% in the exports of aircraft. Canada’s services deficit narrowed by C$1.10 billion to C$3.20 billion in 2Q 2024. Exports of commercial services grew by 2.60% to C$32.60 billion, while imports of commercial services inched down 0.90% to C$30.10 billion. The country’s travel deficit narrowed to C$1.50 billion in the June 2024 quarter.
According to the second estimate provided by the US Bureau of Economic Analysis, the country’s economy expanded by 3% q-o-q in the June 2024 quarter, up from 2.80% in the initial estimates. Economists did not anticipate any change in the preliminary estimate. In the first quarter, the US GDP rose by 1.40%.
Current-dollar GDP rose (annualized) by 5.50% (or $383.20 billion) in the June 2024 quarter to $28.65 trillion. This reflects an upward amendment of $23.20 billion from the preliminary estimate.
Current dollar personal income grew by $233.60 billion in 2Q 2024, a downward amendment of $4 billion from the previous estimate. The US disposable personal income grew by 3.60% (or $183 billion) in 2Q 2024, a downward revision of $3.20 billion from the initial estimate. Personal savings was $686.40 billion in 2Q 2024, a downward revision of $34.10 billion from the initial estimate.
The US Department of Labor stated that the first-time unemployment claims stood almost unchanged at 231,000 in the week ending August 24 compared with 233,000 (upwardly revised by 1000) in the previous week. The reported figure was slightly better than expectations of 232,000.
The four-week moving average was 231,500, down 4,750 from the previous week’s average of 236,250 (upwardly revised from 236,000).
The upbeat US GDP data is expected to keep the USD/CAD pair slightly bullish in the short term.
Technically, the USD/CAD pair is rising after testing the support at 1.3465. The next resistance is anticipated to be only near 1.3620. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic indicator is in the bullish zone. Therefore, we anticipate the USD/CAD pair to remain in an uptrend for the next few trading sessions.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
