forex USD/CAD：Bank of Canada Faces the Challenge of Fiscal Deficit

[Anzo Lim 0]

https://jump.wikifx.com/83348CF26389B46D

Canada’s Prime Minister Trudeau’s fiscal deficit policy announced on Monday could put pressure on the Bank of Canada to act amid a weak economy. Data shows that Canada will have a C$ 26.6 billion deficit this year, and next year's deficit may reach C$ 28.1 billion, which is higher than the level outlined in the spring budget.

 

Since higher deficits are partly due to changes of pension calculation method rather than actual stimulus, the result may be a heavier burden on the central bank. If the federal government cannot provide more financial support, the central bank’s responsibility will be even heavier then if the economy softens more than expected in 2020.

 

We expect the Bank of Canada to postpone the rate cut until the second quarter of 2020. The Bank of Canada held interest rate in early December, and the interest rate remained unchanged throughout 2019, while 40 other central banks, including the US Federal Reserve, chose to cut interest rates. Sluggish economic trend will test the Bank of Canada's patience and will possibly trigger a rate cut in the second quarter of next year.

 

USD/CAD daily pivot points 1.3150--1.3154

S1  1.3118                R1 1.3189

S2  1.3081                R2 1.3223

Edited December 17, 2019 by Anzo Lim