For over a year now, the CAD has been gaining against its southern neighbor.
Part of that has been because the USD got weaker as safe-haven flows diminished. But it seems that the CAD reached its best performance back in mid-March.
Since then, it has been somewhat weaker, and is poised to leave the month with little changed.
Has the CAD touched the bottom?
Another factor in the mix is that oil reached its most recent peak back on March 5th. And it has been on the backfoot through most of the month.
That is even including the disruption in the Suez Canal. (Though most crude transport in that region is mainly for Europe, and represents around 3% of global transportation.)
Another problem facing Canada is the return of Covid cases. While infection rates have gone down in the US, the world is facing a resurgence of cases in a potential “third wave”.
Canada is facing a similar problem, with total case numbers nearly double what they were at the start of the month (though still off the winter highs).
Canada following Europe?
Some experts have suggested a pattern.
Strick lockdowns slow the spread of the virus, which reduces the strain on medical facilities and deaths in the short term. But, the country then can’t come out of the lockdown without a spike in cases, because there isn’t much immunity in the population to slow the spread.
The solution, of course, is to secure immunity through vaccination.
But many countries that have opted for strict lockdowns have been slow to roll out vaccinations, and that includes Canada. So far, less than 10% of the population has been vaccinated, putting the country in the same situation as continental Europe.
Or, sort of. Europe has domestic production of vaccines. Canada, on the other hand, has to import all of its doses. With the US focusing on vaccinating its own population first, Canada has tried to import vaccines from elsewhere.
Expectations are for the US to reach its primary vaccination goal by May. And, presumably, more vaccines would become available for export to Canada from June.
What we are looking for
With lagging vaccination roll-out, expectations are for Canada to remain behind the UK and US in its reopening. In fact, there is potential for a re-application of lockdowns in the near future.
The lack of economic liftoff could keep the CAD under pressure as the situation in March and April might be more similar to the start of the year.
Projections for the January Canadian Monthly GDP indicate a further acceleration to 0.5% monthly, compared to 0.1% recorded in December.
We should remember that was still when the country had lockdowns, which have been eased since then. Therefore, Q1 GDP might show faster growth.