This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Canada’s merchandise trade deficit (a measure of goods in and out of the country that does not take into account services, capital transfers or foreign investments) increased in December, going from C$1.53 billion in November to C$1.66 billion in December (furthermore, the magnitude of November’s deficit was revised higher from the previously reported C$0.94 billion).
This was much wider than had been expected, with imports increasing 1.2% compared to a 0.9% rise in exports. Year-on-year imports (+7.1%) are far larger than exports (+2.9%), which is concerning for an export-driven economy like Canada. A 22.6% rise in energy imports lay behind the overall rise in imports.
The initial market reaction to this report was a sell-off in the Canadian dollar, with USD/CAD rising as high as 1.1124 earlier today. The Canadian dollar later strengthened, though, as a separate report showed the Ivey PMI, a measure of monthly changes in the dollar amount of purchases at business across the whole Canadian economy, returned to expansionary levels in January.
The Ivey PMI for January rose to 53.6, a big spike up from December’s reading of 40.2, suggesting that economic activity has bounced back since the New Year. USD/CAD dropped -0.21% by mid-afternoon in New York to 110.60.