The ‘Loonie’ achieved its strongest level against the US Dollar for a week after gaining on the back of two positive Canadian developments.
The Canadian Dollar Exchange Rate was in the region of 0.9758 against the US Dollar as of 10:23 am GMT
Initial advances were made following the release of positive Canadian retail sales data, but additional gains followed as a result of comments issued by Finance Minister Jim Flaherty.
Although Canadian economic growth has slackened over the past nine months Flaherty asserted that the deficit will be defeated by 2015 – just in time for the next election.
But after accruing 172 billion Dollars of debt over the last eight years, eliminating the deficit (which is forecast to stand at 25.9 billion Dollars this year) will require a strong economic rebound and the maintenance of a tight rein on spending.
The Canadian government has calculated that the fiscal shortfall will improve by 7.2 billion Dollars in 2014, 12.1 billion Dollars in 2015 and 7.4 billion Dollars in 2016.
Flaherty was insistent that these targets are achievable: ‘I’m actually very confident. We could have done more. We could have has a figure that showed a bigger surplus than 800 million Dollars in 2015-16. We do not need to slash and burn, we can be sensible over time.’
Some economists have expressed less certainty.
Mary Webb of Scotiabank, for example, asserted that the odds of the goal being reached have changed: ‘It doesn’t mean it won’t happen, but we have to see the proof of it happening.’
Webb’s view was seconded by chief economist Doug Porter who stated: ‘I feel less confident in saying they can balance the budget in 2015 than a year ago.’
Despite the detractors the Canadian Dollar still achieved C$1.0252 against its American counterpart following Flaherty’s comments.
The ‘Loonie’ also strengthened against the Euro on the back of poor Eurozone manufacturing/services figures and developments in the Cyprus situation.
As FX expert Matthew Perrier stated: ‘There was probably a bit of early strength in the Canadian Dollar against the Euro on the back of softer European economic numbers this morning. The market is waiting to see what happens over the next couple of days with Cyprus.’
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