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Canadian trade data released on Thursday showed a deficit of 3.3 billion, in line with expectation. Analysts at CIBC point out it is materially wider than the average of what had been seen in the years leading up to the pandemic. They explain that a big chunk of export gains was due to gold exports to the UK, which took the form of both gold bullion being shipped and transfers of the commodity within the banking system, unlikely to be sustainable.

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“A slightly narrower trade deficit in November won’t give markets much to cheer. Exports looked soggy outside of a surge in gold shipments which seems unsustainable, while foreign goods destined for Canada fared even worse. Adding the two up, total trade posted its most sluggish advance of the year, which is further evidence of the slowdown in economic activity that likely occurred towards the end of 2020. The export struggles in this report will stand out as the Bank of Canada keeps an eye on how much of a headwind the recent appreciation of the Canadian dollar will be for outbound shipments moving forward.”

“The recent strength of the Canadian dollar will support a narrower nominal trade balance in the near term by making imports cheaper, and could help incentivize some business investment. But the Bank of Canada will be concerned with how much of a headwind the loonie’s appreciation is to the competitiveness of the country’s exports.”