Canadian dollar powers higher, GDP next

Friday’s economic releases:

• Canadian GDP
• US PCE Price Core Index

The Canadian dollar is showing limited movement on Friday. In the European session, USD/CAD is trading at 1.3276, down 0.05%. We could see stronger movement in the North American session, with the release of Canada’s GDP and the US PCE Price Index.

The US dollar continues to stumble and Thursday’s disappointing US GDP report helped send the Canadian dollar gain 0.64% against the greenback. The third-estimate GDP for the third quarter was 4.9% q/q, shy of the 5.2% gain in the second estimate. The slowdown was mainly due to weaker consumer spending, which rose 3.1% in the third estimate, compared to 3.6% in the second estimate. Still, this was the fastest pace of growth since Q4 2021 and hopes are high that consumers will have their wallets and purses open wide for the Christmas season.

Canadian retail sales fell shy of expectations on Thursday, but the Canadian dollar still posted strong gains. In October, retail sales rose 0.7% m/m, just below the preliminary estimate of 0.8% and above the downwardly revised 0.5% gain in September. However, November is expected to show a downturn, with a preliminary estimate of 0%.

Canada’s economy has hit a rough patch, although fears of a shallow recession failed to materialize as the economy posted weak growth in the third quarter. September GDP came in at just 0.1% m/m and October is expected to tick up to 0.2%.

In the US, Federal Reserve members have tried to dampen market expectations for rate cuts next year. The markets are expecting the Fed to go on a tear, with up to six cuts in 2024, but Fed members are urging caution. Atlanta Fed President Raphael Bostic said earlier this week that he expected two rate cuts in the second half of 2024. On Friday, the Fed will get a look at the PCE Price Index, the central bank’s preferred inflation indicator. The headline and core readings are expected to remain unchanged in November, at 0.2% and 0%, respectively.

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USD/CAD Technical

• 1.3311 and 1.3345 are the next resistance lines
• There is support at 1.3246 and 1.3212

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