The Canadian dollar has been range-bound since the end of November because it is not clear what will be the link between the US and Canadian economies. If the US goes into a recession, the question is whether Canada follow. There is a strong trade link in manufacturing especially for auto-parts. The commodity component of Canadian growth also may suffer if there is a recession. The latest numbers however suggest that the story may be more complex. The Ivey purchasing manager index came out today with a strong positive number one day after the ISM service index took a fall. The correlation between these two indices has been positive in the past but over the last two years has been negative. It has moved close to zero more recently, but the economic evidence suggest that the two economies in the near-term may move in different directions. This means that there may be little downward pressure on the Canadian dollar from slower growth.
No comments:
Post a Comment