Canadian Dollar Flat Amid Bleak Economic Outlook, GM Closure

The Canadian dollar is trading relatively flat to start the trading week. Despite upward momentum in the Canadian economy, recent outlooks suggest that it is not as rosy as many think it is. Moreover, the currency was affected after General Motors announced that it was leaving Canada as the company was embarking upon an overall change to its structure. The loonie did find some momentum in higher crude prices.

Canada’s labor market is performing quite well, but there is a long-term risk on the horizon: the labor force participation rate. Since October 2017, the LFPR has dipped from 65.7% to 65.2%, and it is expected to fall further because there is a widening gap between young people entering the job market and older Canadians on the cusp of retirement.
There is another concern: the gap between private and public sector employment. Over the last year, government employment has grown faster than private sector employment at a rate of 1.5% to 1.1%.
Prime Minister Justin Trudeau and his Liberals are portraying the national economy as a roaring engine. But the details underneath the surface suggest that there are many looming problems.
On Monday, General Motors announced it was closing its assembly plant in Oshawa, which has been there since the 1950s. It is estimated that roughly 2,500 employees would be impacted by the decision to halt production. The company said that it is looking to retool the facility as it undergoes a new corporate strategy, including investments in electric cars and autonomous vehicles.
GM is also shutting down four other US plants, affecting 6,000 workers. Overall, GM plans to slash salaried staff by 15% and reduce the number of executives by 25%.
Ontario Premier Doug Ford confirmed that he spoke with GM executives and they informed him that “there’s nothing we can do,” even if the provincial government intervened. Unifor, the union representing autoworkers in Oshawa, said it plans to meet with GM.
The loonie did benefit from rising energy prices. January West Texas Intermediate (WTI) crude oil futures advanced $1.28, or 2.54%, to $51.70 per barrel on the New York Mercantile Exchange. Crude is one of Canada’s biggest exports.
On the data front, consumer spending rose 0.2% in October after tumbling 0.1% in September. The consumer price index (CPI) increased 0.3% following two consecutive monthly declines.
The USD/CAD currency pair rose 0.02% to 1.3238, from an opening of 1.3235, at 16:32 GMT on Monday. The EUR/CAD jumped 0.05% to 1.5017, from an opening of 1.5010.

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