Fiscal accountability was the clear theme during the Canadian government’s early evening address, which was again headed by Canadian Prime Minister Carney. In his state of the state address, Carney highlighted a focus on “spending smarter, investing more.” This proposal aims skilled foreign workers. It times more on supporting the growth of Canada’s resource sector to help counterbalance and adapt to the changing trade relationship between Canada and the United States.
In the photo-finish category for other economic indicators, Canadian retail sales are forecast to rebound by 1.0% in August. If confirmed, this expected increase would be in step with advance data released in July, indicating a positive ongoing trend of consumer spending and economic recovery. That anticipated jump is in line with a wider expected bounce in Canadian data that has more recently seen several positive surprises.
The CAD too has staged a decent rebound, with the CAD struggling at resistance levels near the 1.4005/10 area. Recent SCT short-term price action suggests that this zone serves as a temporary speed bump. This comes on the heels of the U.S. dollar’s recent retreat from Tuesday’s peak. The 200-day moving average for CAD is currently at 1.3961, placing it slightly above the vital low 1.40 range. Should the USD break below this threshold, it might open the door to pressure on major support levels. Those ceilings are around the upper 1.39s.
Market analysts at Scotiabank noted the CAD’s current performance, stating, “That CAD is firmer but it is hardly storming higher on the charts.” This sentiment represents a tentative encouragement about the CAD’s direction in an uncertain and constantly changing market environment.
Bank of Canada Governor Tiff Macklem has given forward guidance that this cut to the policy rate will be a modest quarter-point. Look for an announcement on this exciting decision sometime next week. It’s a powerful move that would lead to deeply influencing consumer behavior. It could change the entire economic picture as Canada approaches a series of important fiscal crossroads.
Besides these fiscal developments, Prime Minister Carney’s government is at a crossroads. The new minority government would be at risk of an election if a legislative assembly does not uphold the budget the government has promised for early November. The successful passage of this budget will be crucial for keeping our Commonwealth on stable footing and for keeping up with needed investments in critical sectors.