1.09 0.55%
    1.24 0.71%
    0.68 1.51%
    132.42 -0.28%
    0.63 0.67%
    0.91 -0.26%
    1.34 -0.6%
    144.37 0.26%
    0.88 -0.16%

Canadian dollar appears to be stronger despite gloomy BOC outlook

The Canadian businesses as well as the consumers think the economy will not recover as fast, according to the BOC survey for Q1.

The BOC survey painted a realistic picture

Approximately half of Canadian companies anticipate a moderate recession within the next year, according to a survey conducted by the Bank of Canada (BOC). This, however, is less compared to the fourth quarter survey.

79% of businesses anticipate inflation to remain above 3% over the following two years, compared to 84% in the previous quarter. Comparing the fourth to the first quarter, the overall business sentiment decreased from 36% to 35%. 59% of firms surveyed anticipated that inflation would remain significantly higher than 2% until at least 2025.

More to read: Dow Jones approaches critical resistance – will it hold?

Firms continue to perceive the labor market as constrained, despite easing labor shortages and wage growth pressure. Firms anticipate a moderation in the magnitude and rate of output price growth.

This indicates that firms are progressively adopting more conventional pricing strategies. Although surveys were conducted before global banking stresses emerged in early March, evidence suggests business sentiment has not changed much since then.

A different BOC report on consumer expectations reveals that 20.3% of Canadians anticipate a significant economic downturn in the next 12 months, while 37.7% anticipate a minor downturn. Inflation expectations for the next year decreased to 6.03% compared to 7.18% in Q4. Inflation expectations for the next two years decreased to 4.27% from 5.18%.

These surveys paint a picture of slowing growth, easing supply constraints, and moderating inflation expectations, albeit with none of those problems fully solved and back to pre-pandemic norms as yet,” said Andrew Grantham, a senior economist at CIBC Capital Markets.

The US dollar cannot keep up

The S&P Global Manufacturing PMI for March turned out 49.2, which was below expectations of 49.3. Later, the Institute of Supply Management (ISM) released the Manufacturing PMI, which plummeted to 46.3, below the anticipated 47.5 and February’s data.

You may also like: How to invest $100,000? Read this before you do so

On the Canadian side, the S&P Global Manufacturing PMI dropped to 48.6 from 52.4, indicating a bleak economic outlook for the Canadian economy. As a result, the dollar lost some of its prior gains, which were also supported by rising crude prices. Since traders started counting on a less aggressive Fed, the USD/CAD declined from around 1.3500 to a daily low of 1.3424.

The bearish pressure continues

The USD/CAD extended its losses on Monday, and the bears are keeping up the pressure. The price is closing in on the 200-day average of 1.33751, which will act as support.

In the long term, the bears could push the pair even lower, as the breaking of the 200-day average would signal an even stronger sell. The next support could be 1.327 last seen in February.

Also interesting: Bloomberg joins the AI race: Welcome BloombergGPT

In case some events push the bears to cash in, the bulls could take action toward 1.385 in the long run. A short intraday correction may appear, as bears will start closing their trades.


USD/CAD 1D chart, source:, author’s analysis

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.


Post has no comment yet.

Want add your comment? Sign up or Sign in