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Canadian Dollar Surges on Record US Trade Deficit and Surprising Trade Surplus

Strategic Insights

— 2 min read

The Canadian dollar recorded significant strength on Wednesday, as a record large US trade deficit, coupled with a stronger-than-expected Canadian trade surplus in November, contributed to its rise. The Canadian dollar traded at a high of 83.37 US cents (C$1.1995) at the close of the North American session, up from the previous day's closing mark of 82.10 US cents (C$1.2180). Analysts attributed the currency's gain to the large US trade gap and the resulting declines in the US currency.

Key Takeaways:

  • The Canadian dollar showed significant strength on Wednesday, benefiting from a record large US trade deficit and a stronger-than-expected Canadian trade surplus in November.
  • The Canadian dollar traded at a high of 83.37 US cents (C$1.1995) at the close of the North American session, up from the previous day's closing mark of 82.10 US cents (C$1.2180).
  • The record US trade deficit widened to US$60.3 billion in November, well above expectations of US$54 billion.
  • Canada's November trade surplus grew to C$7.3 billion, well above expectations of C$4.4 billion.
  • Analysts attributed the Canadian dollar's gain to the large US trade gap and the resulting declines in the US currency.
  • Technical analysis revealed that nearby resistance is seen at the day's high of 83.68 US cents (C$1.1950), while support is seen at 82.99 US cents (C$1.2050).
  • The Canadian bond market closed slightly higher, taking its cue from the US Treasury market, as the surprising Canadian and US trade data led to some reassessment of the monetary and economic outlooks.
  • Sources suggested that the sharp advances in the Canadian dollar may lead the Bank of Canada to hold off on interest rate increases for the time being, which is supportive for the bond market.
  • Bank of Canada senior deputy governor, Paul Jenkins, is scheduled to speak in Ottawa on Thursday, which may provide direction for the currency and bond markets.

Statistics:

  • The Canadian dollar traded at a high of 83.37 US cents (C$1.1995) at the close of the North American session.
  • The US trade deficit widened to US$60.3 billion in November.
  • Canada's November trade surplus grew to C$7.3 billion, well above expectations of C$4.4 billion.
  • The Bank of Canada's interest rates will likely remain unchanged in the short term due to the strong Canadian dollar.

Sources:

  • Resource News International
  • COMTEX (http://www.comtexnews.com)

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