Canada’s economy without any doubt is in recession, the last GDP figure of -0.1% shows contraction in the second quarter. The economy relies mostly on international trade as major source of revenue in which energy export occupies a major faction of Canada’s export. The falling oil price has been a major setback to the Canadian economy and has dragged the economy to recession. Oil prices are expected to remain low at least till the end of the year as fundamental shows increased supply and poor demand are likely to continue and this will keep oil prices low.
New Zealand trade balance for July shows a trade deficit of NZD 649 million, Labour force participation also dropped by 0.2% and unemployment increased to 5.9%. In a policy statement sometimes in June, the RBNZ governor made it clear that kiwi is too expensive and the bank is expected to put in different measures to make it cheap. Ever since then Kiwi has been dropping all the way from 0.72 and now trading at 0.62.
With the current state of the Canadian and New Zealand’s economy, both central banks are most likely to take some action this week by cutting interest rate by another 25bp. Should this be the case, USDCAD might hit a yearly high of 1.35 and NZDUSD might hit the yearly low of 0.59