The loonie gained 2% last week, after the BoC hike and on general U.S. dollar weakness.

As a result, “Commodities benefited [and] oil gained slightly, while precious metals gained +1.5%,” says Prab Sagoo, associate director at Nasdaq Advisory Services, in his latest weekly update. Year-to-date, the loonie’s looking at a 10% increase.

Read: Best Canadian commodity picks

However: “Currency markets shouldn’t dismiss what was a very poor trade report for July,” says senior economist Andrew Grantham in a weekly CIBC economics report. Consequently, the export gains made in the first half of the year vanished.

In Canadian dollar returns, exports fell by 4.9% month over month, and imports fell by 6%. In volume terms, exports fell by 1% and imports fell by 2.3%. “More of the decline in export and import values was therefore due to lower prices,” notes Derek Holt, vice-president and head of capital markets economics at Scotiabank, in commentary last week.

The dip can’t be written off as related to weaker commodity prices or impacts from B.C. fires, says Grantham, as Alberta and B.C. saw smaller trade dips than the other large provinces.

“Overall, there are few excuses, and this could be the first sign of a slowdown in the economy, which will see the BoC turn less hawkish and result in USDCAD moving back toward the 1.30s,” he says.

While one month doesn’t make a trend, non-commodity export volumes have stagnated over the past seven years, says Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets, in a weekly economics report. Perhaps the currency’s level doesn’t have as big of an impact on trade as it once did, he suggests.

“Consider that the loonie traded around parity from 2010 to early 2013 before weakening consistently and hitting its cyclical nadir in early 2016, amid a global market meltdown,” he says. “And yet, there was no major progress or setbacks for non-commodity exports over that period.”

But that doesn’t mean there’s no impact.

“The biggest quarterly trade deficit in history came in 2016Q2 when the loonie surged 6.7%,” he says.

The loonie is on pace for a similar gain this quarter, and July’s trade shortfall means the gap for the quarter could be significant — and possibly set a record.

“The already sizeable current account deficit looks poised to worsen, reinforcing that the currency is already overvalued and going in the wrong direction,” he concludes.

Read the full CIBC and BMO reports.

Also read:

What Canada’s hot streak means for interest rates

Trade gap reveals potential for volatile loonie

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