Canadian dollar eyes GDP, US data

The Canadian dollar has edged lower on Friday. In the European session, USD/CAD is trading at 1.3600, down 0.33%.

We could see stronger movement from the Canadian dollar in the North American session, with key events in both Canada and the US. Canada releases GDP for October, with a forecast of a weak gain of 0.1% m/m. This would be unchanged from September GDP. Canadian consumers have been holding tighter to the purse strings and saving their hard-earned money, as wage growth has failed to keep pace with inflation. The decline in consumer spending has hurt economic growth and there are worrying signs that economic growth has stalled in the fourth quarter.

In the US, the week wraps up with a host of events. The markets will be paying particular attention to the PCE Core Index, the Fed’s preferred interest indicator. The index is expected to slow to 4.6% y/y in November, down from 5.0% a month earlier. Personal Spending and Personal Income are also expected to soften. The US also releases durable goods, UoM consumer confidence and UoM inflation expectations.

GDP revised upwards, jobless claims beat forecast

The US dollar received a lift on Thursday, thanks to some solid US data. Unemployment claims rose to 216,000, up from 214,000, but investors liked that the reading was lower than the consensus of 222,000. As well, GDP for Q3 was revised upwards to 3.2%, up from 2.9% in the initial estimate. The strong data is another indication that the Federal Reserve needs to maintain its aggressive tightening stance, which has raised the likelihood of higher-for-longer rates.

The markets were hoping that Thursday’s Canadian inflation report would provide clues about BoC rate policy, but inflation was mixed. Headline CPI slowed to 6.8%, down from 6.9%, while two core indicators rose slightly. It appears too early to determine if inflation is headed lower, and as thing stands, there is a strong likelihood that the BoC will raise rates by 25 basis points at its January meeting.

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USD/CAD Technical

• There is resistance at 1.3640 and 1.3762
• 1.3576 and 1.3484 are providing support

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