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Expiries for Nov10 NY cut 1000ET (Source DTCC)

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Narrowing Support For CAD From Trade Data

CANADA
[small correction to line on reliance on energy revenues]
  • The merchandise trade surplus was notably smaller than expected in Aug at C$1.5B (cons 3.5B) after a downward revised 2.4B in July (initially 4.1B), from both energy and non-energy items.
  • Add in a growing service deficit (largest nominal since Mar’20 on re-opening) and the goods & service trade balance fell into a small deficit for the first time since Dec’21.
  • The three-month rolling surplus narrowed to 0.9% GDP from 1.8% GDP (initially 2.4% GDP), which remains elevated vs the pre-pandemic average deficit of ~3.5% GDP but with non-energy trade deficits already at historical highs and energy products doing the heavy lifting, prone to a pullback in energy revenues.
  • USDCAD saw only limited reaction on the data with strong building permits providing an offset, but the continued widening in non-energy deficits in particular could increasingly weigh on CAD, which in trade-weighted terms remains above pre-pandemic levels in contrast to its sharp decline vs the USD.

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[small correction to line on reliance on energy revenues]
  • The merchandise trade surplus was notably smaller than expected in Aug at C$1.5B (cons 3.5B) after a downward revised 2.4B in July (initially 4.1B), from both energy and non-energy items.
  • Add in a growing service deficit (largest nominal since Mar’20 on re-opening) and the goods & service trade balance fell into a small deficit for the first time since Dec’21.
  • The three-month rolling surplus narrowed to 0.9% GDP from 1.8% GDP (initially 2.4% GDP), which remains elevated vs the pre-pandemic average deficit of ~3.5% GDP but with non-energy trade deficits already at historical highs and energy products doing the heavy lifting, prone to a pullback in energy revenues.
  • USDCAD saw only limited reaction on the data with strong building permits providing an offset, but the continued widening in non-energy deficits in particular could increasingly weigh on CAD, which in trade-weighted terms remains above pre-pandemic levels in contrast to its sharp decline vs the USD.