The Canadian dollar 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 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 pay 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
Thanks to some solid US data, the US dollar received a lift on Thursday. Unemployment claims rose to 216,000, up from 214,000; investors liked that the reading was lower than the consensus of 222,000.
The GDP for Q3 was revised upwards to 3.2%, up from 2.9% in the initial estimate. The strong data indicates that the Federal Reserve needs to maintain its aggressive tightening stance, raising the likelihood of higher-for-longer rates.
The markets hoped 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.
USD/CAD Technical
- There is resistance at 1.3640 and 1.3762
- 1.3576 and 1.3484 provide support
