AUD/CAD Fundamental Analysis
As fears regarding the US fiscal cliff take their toll on the global economy, and as investors continue to be plagued by delays in the Greek debt saga, the Canadian dollar is expected to maintain its bearish dance with the Australian currency. Canada is expected to delay its plan to return to surplus by a year as revenues grow weak.
In a speech before the Fredericton Chamber of Commerce yesterday, Canadian Finance Minister Jim Flaherty said he will delay plans to balance the federal budget by one year and run larger than expected deficits as lower commodity prices and slower growth hamper the finances of the only Group of Seven country with a stable AAA debt rating.
The revised budget projects a balanced budget from deficit by the fiscal year beginning April 2016, a year later than what was forecast in the March budget. It can be remembered that Mr. Flaherty cut revenue projections by C$36.2 Billion over the next five years. The Finance Department announced that it has penciled in a shortfall for the 2012-13 fiscal year of $26 Billion, up from the March budget estimate of $21.1 Billion.
Mr. Flaherty acknowledged that the fiscal cliff is a “serious issue for the world economy.” True enough, economists warn that a failure by US lawmakers to avert the fiscal cliff of automatic US tax increases and government spending cuts beginning in January would lead the world’s largest economy back into recession. Such is seen to likely adversely affect Canada’s economy, also.
On the other hand, in Australia, a Westpac Banking Corp. and Melbourne Institute survey showed that consumer confidence in the Land Down Under rose for a third consecutive month in November to its highest in over a year. Households are feeling better off and more confident about the economic outlook after five cuts in the Cash Rate from November last year to October this year. The sentiment index for November gained 5.2 percent to 104.3, as it reached the highest level since April 2011.
Considering the impact of these fundamental data on the market of the AUD/CAD, a long position is advised. Technical price corrections are still probable to occur, though.
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