Canadian economy showing signs of a slowdown

In light of the more relaxed economic data, the Bank of Canada anticipates maintaining its policy rate at 4.50% for the remainder of the year, according to the most recent survey by Reuters. Analysts predict that, as a result, the Canadian economy is starting to contract.

In recent months, the housing market, business investment, and consumer spending have all declined. It showed a halt in economic growth at the end of 2022, indicating that the recent 425 basis point rate hike by the Bank of Canada has begun to bear fruit.

According to the most recent economic data, the Ivey PMI, or Purchasing Managers Index, which was released on Monday and measures month-on-month changes in economic activity based on the number of orders at private companies across Canada, grew at a slower pace in February, dropping to 51.6 from 60.1 in January and approaching the number below 50, which would indicate a contraction in both the manufacturing and service sectors. While the employment indicator fell to 59.4 from 60.5 in January, and the supplier delivery index increased to 55.8 from 52.3.

According to the survey, most analysts predict the Bank of Canada will keep interest rates at 4.50% through 2023 at its interest rate decision meeting on Wednesday, March 8th. Notwithstanding the fact that the Federal Reserve is certain to hike interest rates many more times.

Interest rate futures prices, on the other hand, deviate from the Reuters poll. It is expected to rise another 25 basis points to 4.75% in the middle of the year, and some analysts predict interest rates to remain at 4.50% at the end of 2023, while others expect it to be lower, and a small number of analysts expect it to be higher.

In the meantime, Canadian inflation has slowed more than projected, reaching 5.9% in January. Although still over the 2% target range, the latest GDP numbers show that the Canadian economy is weaker-than-expected, with no economic growth in the fourth quarter of last year, compared to the Bank of Canada's prediction of 1.3% economic growth. As a result, the Bank of Canada has previously stated that it is likely that the Bank of Canada will wait for direction and other economic statistics before considering further interest rate hikes.

The US dollar, on the other hand, slipped against a basket of currencies on Monday as investors await the Federal Reserve's speech on Tuesday and Wednesday nights, as well as employment data expected Friday night. These will be significant events given that they will signal the path of monetary policy, which will impact the market trend and the global economy during this period.

Data for Technical Analysis (5H) CFD USD/CAD

Resistance : 1.3615, 1.3620, 1.3627

Support : 1.3601, 1.3596, 1.3589                   

5H Outlook

1H Outlook

Source: Investing.com                                       

Buy/Long 1 If the support at the price range 1.3596 - 1.3601 is touched, but the support at 1.3601 cannot be broken, the TP may be set around 1.3616 and the SL around 1.3593, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.3615 - 1.3620, TP may be set around 1.3627 and SL around 1.3598, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.3615 - 1.3620 is touched, but the resistance 1.3615 cannot be broken, the TP may be set around 1.3597 and the SL around 1.3623, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.3596 - 1.3601, TP may be set around 1.3589 and SL around  1.3616, or up to the risk appetite.     

Pivot Points Mar 07, 2023 03:44AM GMT

Sources: Investing 1, Investing 2