Strong Canadian dollar, low inflation, low unemployment and steady gasoline prices

Several indicators of a strong economy are causing the rise Canadian dollar.

Fuel prices

Something strange has been happening to gasoline prices. For the first two weeks of September, it only fluctuated between 96 and 98 cents per litre, despite crude oil prices exceeding $80 per barrel and only a few dollars from the all time record of $84. Moreover, the price was identical in all stations around the city.

This last week, the price fell to as low as 92.5.

This is all good news, but why was gasoline 130 cents when Hurricane Katerina hit?

Economy and inflation

In related news, the Canadian economy added more jobs, causing the unemployment rates to be the lowest in 33 years. This has fueled the rise of the Canadian dollar against the falling US dollar, exceeding 1.02 US for one Canadian dollar briefly before closing at 1.018.

More inflation and higher Loonie?

There is speculation that the Central Bank will have to increase the interest rates to curtail inflation, causing the Canadian dollar to rise more than what it is now.

This is not good news for most Canadians, since our exports will be more expensive for the US market and tourism from the USA will fall. Retail prices may fall on imports, but so far, this has not happened.

Links and resources

• CBC: Inflation drops to 1.7% on lower gas prices.
• CBC: Jobless rate dips to 33-year low of 5.9%.
• CBC: Canadian dollar hits $1.02 US on strong jobs report.