The Canadian dollar has been quiet over the past two trading days but that could change today with the release of Canada’s GDP report. In the European session, USD/CAD is trading at 1.4005, down 0.27%. There are no US events today and US markets will be closing early for the Thanksgiving weekend.
Canada GDP Expected to Rise to 0.3%
It has been a quiet week on the data calendar for Canadian releases, as the sole tier-1 event is today’s GDP report. After posting no growth in August, the market estimate for September stands at 0.3% m/m.
The lack of growth in September was expected, as the economy ran into a brick wall due to the weight of high borrowing costs. Interest rates remain high at 3.75% and this has dampened business activity and consumer demand. Recent cuts by the Bank of Canada have yet to filter through the economy.
The Bank of Canada will be keeping a close eye on the GDP release. If GDP is short of expectations, there will be pressure on the central bank to respond with a second straight cut of 50 basis points. This is the second to last key event prior to the rate announcement on Dec. 11, with the employment report on Dec. 6.
Inflation and the health of the economy are not the only factors on the minds of BoC policymakers. The Canadian dollar has taken a beating and has declined over 4% since Oct. 1. The BoC doesn’t want to see the Canadian dollar continue to depreciate and a 50-bp cut could sent the currency sharply lower.
USD/CAD Technical
- USD/CAD is testing support at 1.3995. Below, there is support at 1.3976
- 1.4019 and 1.4038 are the next resistance lines