Canadian Dollar May Reverse Gains as Recession Deepens.
The Canadian Dollar will find its recent gains threatened as a busy data docket underscores both a weakening domestic economy and the deepening global downturn. Canadian Dollar May Reverse Gains as Recession Deepens Fundamental Outlook for Canadian Dollar: Bearish - Canadian Dollar to Re-Test Trend Line Resistance, May Turn Lower Against USD - Economy Shrinks Again in January, Extends Longest Recession on Record The Canadian Dollar will find its recent gains threatened as a busy data docket underscores both a weakening domestic economy and the deepening global downturn. The Trade Balance is set to post a -C$1.2 billion deficit in February, the largest monthly shortfall in at least 33 years, as continued recession weighs on demand from Canada's southern neighbor. To that effect, it is understandable to see why the Ivey PMI gauge of business sentiment is likely to show continued contraction in activity (albeit at a slower pace) with another print below the 50 "boom-bust" threshold. This, in turn, will encourage firms to scale back production and cut workers, with the economy set to lose another 50k jobs in March to bring the unemployment rate to 8% for the first time since May 1999. Wage-less and credit-starved, Canadian consumers are sure to continue to hold back on spending, especially on big-ticket items. As such, the real estate market is to remain on its knees, with Building Permits expected to drop for the fifth consecutive month while Housing Starts fall to the lowest in over a decade. The stagnant state of the economy to be revealed in the above statistics will go beyond presenting a dismal picture of Canada to once again reiterate the global nature of the current malaise. The suffering of the northern-most economy in the Western hemisphere owes largely to contagion from United States, offering a microcosm of the global impact of the absence of demand from the world's largest consumer market. To that effect, the data set to be released may weigh on the Canadian Dollar not just because it paints a bleak picture of the currency's home turf but also because it may return investors' focus back to the grim reality of the worst global recession since Word War II following last week's dizzying optimism following the G20 summit in London. - IS
2009 Al Bawaba (Albawaba.com)
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|Date:||Apr 4, 2009|
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