Volatility in CAD to USD Rate, As Canada Trade Balance Jumps
The volatility in the CAD to USD rate has increased in recent weeks. For about two months, USDCAD was confined within a narrow 2-cent range. However, in July, it embarked on a bullish trend, rising from just below 1.36 to 1.3946. This surge was influenced by the Bank of Canada’s dovish rate cut. Despite the US dollar losing value against most major currencies, the Canadian dollar has also been weakened due to a recent shift towards negative risk sentiment, fueling the upward movement until yesterday.
USD/CAD Chart Daily – 1.40 Still Seems A Bit Too Much For Buyers
Today, USD/CAD has dropped below 1.38, which is a significant support and resistance zone. The Bank of Canada cut its policy interest rate by 25 basis points, lowering it from 4.75% to 4.5%. The Bank continues to adhere to its balance sheet normalization policy. This dovish rate cut is expected to keep the Canadian dollar weaker in the coming weeks, as the Bank of Canada anticipates a continued downward trajectory in inflation, which is unfavorable for the currency.
Canada June Trade Balance
June Trade Balance:
- +$0.64 billion vs. -$1.84 billion expected
- May Trade Balance was -$1.93 billion
Exports:
- $66.65 billion vs. $62.45 billion prior
- Surged 5.5% to $66.65 billion, the largest monthly increase since February 2024
Imports:
- $66.01 billion vs. $64.37 billion prior
- Rose 1.9% to $66.01 billion, near the all-time high from June 2022
Key Drivers:
- Crude oil and gold exports accounted for over 75% of the total export increase
- Crude oil exports jumped 13.3%, driven by higher volumes to Asian countries via the expanded Trans Mountain pipeline
- Unwrought gold exports spiked 35.3% amid geopolitical tensions and high demand
Additional Highlights:
- Imports of passenger cars and light trucks hit a record C$6.8 billion, up 8.2%
- Trade surplus with the US widened to C$9.4 billion, the largest since November 2023
- Trade deficit with the rest of the world narrowed to C$8.7 billion from C$10.4 billion in May
There is some unexpected positive news for the Canadian economy, as the trade balance improved dramatically and import and export volumes increased. The gains were mostly driven by increases in crude oil and gold exports. However, as Oil prices fall, the balance will likely turn negative again.
USD/CAD Live Chart
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