Canada: GDP Exhibits Indication of Rapid Growth, Before Delta Surge

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The Canadian GDP figures this week should indicate that economic activity rebounded in June following COVID’s spring wave. With anticipated 0.8 percent growth in June GDP, which is somewhat higher than Statistics Canada’s early estimate of 0.7 percent. This would reverse the declines seen in April and May, resulting in a small 2.5 percent (annualized) increase in output in the second quarter. However, the reopening of the economy is expected to result in another significant gain in July.

Manufacturing activity is still hampered by supply chain disruptions, and residential investment is anticipated to have cooled as housing markets began to decline in Q2. Consumer spending on services has increased, especially in the travel and hospitality industries, which were severely hit by the pandemic. Spending on food services increased by 20% in June, and analysis of card transactions predicts another significant increase in July–akin to a comparable surge in the United States last spring, which swiftly pushed foodservice sales back beyond pre-pandemic levels.

The virus, which has continued to spread across much of Canada over the previous week, will determine how long such advances can be sustained in the short term. Vaccination rates are still rather high, which will likely limit the scope of any future containment measures. The spread of the virus has, at the very least, reduced the upside risk to the near-term prognosis, but the pandemic’s impact on economic activity in the second half of 2021 is likely to be much less than in the first.

Canada: USDCAD Pair Sinks to a Daily Low Under 1.2620

The USD/CAD pair reversed course after climbing above 1.2700 earlier in the day and was last seen trading at a daily low of 1.2612, down 0.50 percent on the day. USD/CAD appears to be weighed down by broad-based USD weakening following FOMC Chairman Jerome Powell’s comments at the Jackson Hole Economic Symposium.

Whilst Powell stated at the July policy meeting that it may be prudent to begin reducing asset purchases this year, he did not provide a date, causing the USD to fall. The US Dollar Index is currently trading at 92.77, down 0.3 percent on the day.

In response to Powell’s remarks, Federal Reserve Chair Jerome Powell bucked a noisy chorus of hawks among his colleagues by refusing to even hint at slowing the bank’s $120 billion-per-month bond-buying program, according to reports.