USD/CAD Uncertain as GDP Numbers Come Up Mixed

October 4, 2021

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USD/CAD, Canada’s GDP for July came in at -0.1, versus the estimate of -0.2. That is down from the 0.6% we saw in June, which was revised lower from 0.7%. The July level was approximately 2% below the pre-pandemic level of February 2020. The trend in the USD/CAD has reversed since the beginning of summer, with the pair coming in at 1.20; but it has been looking uncertain in the last month or two and today’s numbers were mixed too, so no direction is apparent for this pair yet.

Below, you can have a look at the contributions to the percentage change in gross domestic product (GDP) for the month, according to the main industries and sectors. Accommodation and food services added 0.2%. Agricultural and forestry, utilities, manufacturing and wholesale came in at -0.1%.

Canada July 2021 GDP

July GDP -0.1% versus -0.2% estimated
June GDP revised down to 0.6% from 0.7% previously reported
13 of 20 industrial sectors were up led by accommodation and food services. The gains however were offset by declines in agriculture, utilities, manufacturing and wholesale trade
The good news is that the preliminary information indicates a 0.7% increase in real GDP for August. This estimate will be revised on October 29
Service-producing (+0.4%)
Goods-producing (-1.4%)
Food services rose (12.5%). The second double-digit growth in a row
Accommodation services rose (21.1%) in July as domestic and international travel both rose
Transportation warehouse grew (1.1%)versus 0.8% in June) with growth in air transportation leading the way
Agricultural, forestry, fishing and hunting dropped (-5.5%) as record-setting heat and drought conditions in Western Canada affected national annual crop production estimates. Crop production fell (-13.2%) in July and reached its lowest level since the fall of 2007. Forestry was down (-3.9%), on the back of forest fires in the British Columbian interior and Northwestern Ontario
Utilities fell (-4.9% after a 3.6% gain in June).
Manufacturing fell (-1.1%) driven by declines and durable goods
Construction fell (-0.9%) for the third consecutive month
Wholesale trade fell (-1.9%) for the fourth month in a row
Public sector rose (0.4%)
Retail trade fell (-1.1%), food and beverage stores (-3.3%); and building material and garden equipment and suppliers (-6.5%), leading the way to the downside

The good news is that the expectations for August are for an advance higher, and that the decline was a touch less than expectations. The USD/CAD is higher; with the price up from 1.2670 to a high of 1.2697. In the process, the price has moved back above its 100-hour moving average of 1.26858, but it remains below the 200-hour moving average of 1.2703.