Market Analysis by David Eng, Investment Advisor, Harbourfront Wealth – Sonora Wealth Group
February 28, 2025 –
“The Canadian dollar extended its losses against the US dollar amid weak domestic data, while the resilience of the US economy added further pressure. Canada’s trade deficit widened to CAD 5 billion in the fourth quarter of 2024, the largest since Q3 2023 and the 10th consecutive quarter of deficit. Despite an improvement in the balance of trade in goods and services, which recorded a smaller deficit of CAD 2.3 billion, persistent structural challenges remain.
Exports of goods increased by 4.6% to CAD 201.2 billion, driven mainly by metals, energy products and consumer goods. Imports increased by 3.0% to CAD 201.6 billion, fueled by higher demand for consumer goods and metal ores. In the services sector, exports fell by 1% while imports rose by 1.7%.
For 2024 as a whole, the current account deficit narrowed to CAD 15.6 billion, partially offset by an increase in the investment income surplus. However, the goods trade deficit widened, reflecting the increase in imports and the lower growth rate of exports.
Adding to these concerns, Canada’s relationship with the US remains crucial. In 2024, Canada had a surplus of CAD 91.6 billion with the US, yet if trade relations with the US deteriorate due to ongoing tariff disputes, the Canadian economy could face significant risks, leading to a bearish outlook for the currency.
Meanwhile, strong US GDP figures are adding to the Loonie’s challenges. Preliminary Q4 GDP figures showed a 2.3% growth and an upward revision to the price index. In addition, better-than-expected durable goods orders point to sustained economic momentum. As a result, traders could delay expectations of rate cuts from the US central bank. The markets are currently pricing in the first move to occur in June.
Looking forward, the Loonie is likely to remain under pressure as the ongoing trade tensions continue to dominate market sentiment. Although Trump has once again delayed tariffs on Canada, this uncertain outlook is keeping investors cautious.”
David Eng, Investment Advisor, Harbourfront Wealth – Sonora Wealth Group