Canadian dollar eyes GDP, US jobs data

• Canada’s GDP expected to ease in Q2
• US nonfarm employment payrolls expected to dip to 177,000

The Canadian dollar is calm in the European session, trading at 1.3500, down 0.07%. I expect to see stronger movement from USD/CAD in the North American session, as Canada releases second-quarter GDP and the US publishes the July employment report.

Canada’s GDP expected to slow in Q2

Canada usually releases employment reports on the same day as the US, but Canada’s July jobs report won’t be released until next week. Instead, today we have Canada’s GDP, a key release, along with the US employment release.

Canada’s economy rebounded in the first quarter, as GDP rose 0.8% q/q. This beat the consensus estimate of 0.4% and added support to the case for the Bank of Canada raising rates at the September 6^th meeting. However, today’s GDP report could chill rate hike expectations if the economy took a step backward in the second quarter. The consensus estimate for Q2 GDP stands at 0.3% q/q, which would indicate weak economic growth. If GDP is stronger than expected, the odds of a rate hike will likely increase. The GDP report is the final key release out of Canada prior to the rate meeting, which adds significance to the GDP release.

Investors will also be keeping a close eye on the July US employment report, highlighted by nonfarm payrolls. On Wednesday, ADP Employment Change fell sharply to 177,000, down from a revised 371,000. The nonfarm payroll report is expected to decline slightly to 170,000, compared to 187,000 in the previous reading.

If nonfarm payrolls is within expectations, it will mark the third straight month of gains below 200,000, a clear sign that the US economy is cooling. This would not only cement an expected pause by the Federal Reserve next week but would also bolster the case for the Fed to hold rates for the next few months and possibly into 2024.

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USD/CAD Technical

• USD/CAD tested resistance at 1.3523 earlier. Above, there is resistance at 1.3580
• 1.3444 and 1.3377 are providing support

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