Canadian goods trade deficit likely to have narrowed in July – TD Economics

Canada’s goods trade deficit is expected to have narrowed in July. According to a TD Economics research report, Canadian goods trade deficit is likely to have modestly narrowed to CAD 3.3 billion in July on weaker export and import activity. The Canadian dollar appreciation is expected to have acted as a driving force for the drop in both imports and exports after the CAD rose by around 4.5 percent in the month, though there are also a few one-off events that could make for a noisy report.

Gold bullion imports rose sharply by 40 percent sequentially in June and a full correction should alone subtract CAD 400 million from the deficit, stated TD Economics. The stronger Canadian dollar is expected to feed through to weaker trade activity where FX passthrough is most prominent, namely agriculture and other unrefined resources, of which Canada is a net exporter.

Motor vehicle exports is likely to come under pressure given the declining U.S. demand, a pullback in Canadian production and downward pricing pressures. However, imports are expected to stay well supported by a resilient Canadian consumer, added TD Economics.

At 22:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bullish at 96.7206, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 51.892. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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