Severe weather conditions hit the economy of Canada. The Canadian Dollar weakens against the greenback with rising inflation and high floods.
Canadian Dollar Weakens Against the US Dollar
The Canadian Dollar is weaker against the greenback as it moves lower from 0.8115 to 0.7910 levels. The Canadian to US Dollar conversion is at 0.7910.
Meanwhile, the USD/CAD has resistance at 1.2690 levels. The US Dollar to CAD is on an uptrend from October 26, 2021.
The USD/CAD exchange rate has been moving in a positive direction for the past four weeks. The US Dollar to CAD currency pair rises higher with the value of the Canadian Dollar weakening.
The strong US Dollar index movement is pulling the Canadian Dollar lower.
Retail Sales Strengthen USD/CAD Higher
Retail sales have gone up for the third quarter by 2.7%. But, retail sales moved lower 0.6% in September. The worst-hit was motor vehicle sales. The shortage of semi-conductor chips affected car dealer sales. Statistics Canada predicts an increase of 1.0% in October. The US Dollar to Canadian Dollar shows signs of moving higher with good retail sales, quarter-on-quarter.
Core retail sales have come down by 0.3% in September. The most affected were clothing and accessories retail stores. However, accommodation and travel strengthened as the pandemic effects recede.
Severe Flood in Canada
Heavy rain and floods hit British Columbia. Severe rain and floods, the worst in Canadian history, brought heavy damage to the country. The railroads and highway bridges were the worst hit in the country.
British Columbia floods impact the import and export of goods in Canada. Access to the Port of Vancouver has become impossible by the floods. It affects the transport of goods from and to the port. Goods worth almost $500 million that pass through the port are left stagnant. The flood destroyed normal life in BC. The weather conditions are deteriorating with drastic climatic changes.
Supply disruptions in food, medicine, and fuel affect the economy. People are unable to gain access to basic facilities in British Columbia. Â They are essential goods that people need especially, as floods affect the health issues of the people. The Canadian Dollar moves lower as floods hit economic activity in BC.
Climate Changes Hamper Canadian Dollar
In summer, it was the wildfires that affected the forests of Canada. People faced the dangers of a smoke-filled atmosphere, which forced people out of their houses. The heat warmed up the atmosphere, and many areas were drought-hit, resulting in high food prices. Lower crop yield and lack of water affected the abundant livestock in the country.
The hot summer caused the snow from mountain tops to melt fast. It flooded most parts of Northern Canada. After hitting the year highs at 0.8302, the CAD to US Dollar moved lower. Currently, it is at a four-week low, trading at 0.7910 on the foreign exchange market.
The rising corona pandemic affected activities in the country. Lockdown restrictions affected the economic growth in the country. The pandemic ill-effects continue from March 2020, and the economy is yet to recover. The government is pulling out stimulus measures in the economy as the pandemic effects are coming down. The economy will begin to show a slow recovery, but the current natural disasters hamper growth.
The pandemic is coming under control after the vaccination rollout. But it is the winter rains that disrupt trade activities in Canada. The severe heat and severe floods caused by extreme weather conditions are affecting business activities in the country.
The insurance industry pays heavy compensation for the loss caused by the calamity of floods, rains, and drought. In the last decade, the insurance industry gave an average of almost $2.1 billion to those affected.
Climate change is affecting the environment, especially the national water bodies. Acute water crises and floods affect the ecosystem. Farms and industries are hit by the dry heat and snowy winters, affecting the Canadian Dollar on the forex market.
Soaring Inflation in Canada
High inflation hits the Canadian economy, bringing at surging prices. Bank of Canada views the rising price levels with concern but states that the high prices are transitory. Commodity prices are increasing in Canada. Inflation risks affect the economy, as the inflation rate rose to 4.7% in October.
Bank of Canada may bring in at least two interest rate hikes by 2022, predict experts.
High crude prices supported the Canadian Dollar after the pandemic. Canada is a major exporter of oil, and the loonie moves ahead with increasing oil prices, which are at a multi-year high at $85.40 in the last week of October. However, after touching high levels, crude prices are trading with a losing streak amid lockdown restrictions in certain pairs of Europe, such as Austria.
Energy shortage brought up energy prices in Canada. Rising energy prices are driving inflation higher, reports Statistica Canada.
US Dollar Index trades flat against major foreign currencies. It hit a 16-month high due to the high inflation in the United States.
The fed may raise rates sooner than expected, say experts. Inflation pressure may force the fed to raise rates. Hike in gas prices and consumer prices are affecting the economy.