USD/CAD Monthly Fundamental Forecast August 2015

The USD/CAD closed near a multiyear high at 1.3091 after breaking above the 1.31 level in intraday trading on the last day of the month. The first half of 2015 has revealed unexpectedly weak economic data, with persistent commodity price weakness dragging on growth and spillover effects from the US limiting exports.

Temporary factors have also limited growth, including an auto plant retooling in Ontario and forest fires in the West that have taken a portion of oil sands production offline. Annualized GDP fell 0.6% in Q1, the first quarterly contraction since 2011, and Q2 is likely to be flat. We expect a modest pickup in activity in the second half of the year, bringing 2015 GDP growth to around 1¼% y/y. Despite the first half contraction, the labour market has continued to add jobs at a decent pace so far this year, with positive momentum in construction and services offsetting restructuring in the oil patch. Vehicle sales remain one of the strongest retail sectors, and are likely to edge up to record highs in 2015.

The BoC cut the Bank Rate to 0.5% at its July meeting, and released a less-than-enthusiastic set of forecasts alongside its rate decision. The extent to which the downside forecasts for Q2 will play out should clarify in the weeks ahead as markets receive additional economic data including GDP figures for May. In terms of upside risks, inflation has been solid due to pass through from a weaker C$, among other factors.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events In August That You Should Be Monitoring: