Canadian Dollar Edges Lower Ahead of Canadian GDP
2023.05.31 07:56
- Canada to release GDP
- US debt ceiling deal off to Congress
The Canadian dollar is trading close to a two-month low, as the currency remains under pressure. is trading at 1.3646 in the European session, up 0.34%.
Canada’s GDP expected to improve in Q1
Canada releases later today, and the markets are projecting a modest 0.4% q/q for the first quarter after flatlining in Q4 2022. On an annualized basis, GDP is expected to jump by 2.5% after stalling at 0% in Q4.
The GDP report takes on even more significance as it is the last tier-1 release ahead of the Bank of Canada rate meeting on June 7th. A strong GDP release would support the Bank raising rates, while soft growth would give the Bank room to continue pausing rates at 4.25%. The key to the BoC’s decision could well depend on the GDP release.
The BoC has a tough decision to make at next week’s meeting. The BoC would like to extend its pause of rate hikes but inflation hasn’t cooperated, as it ticked upwards to 4.4% in April, up from 4.3% in March. Inflation has been coming down, but remains well above the Bank’s target of 2%.
In the US, the debt ceiling deal between President Biden and House Speaker McCarthy now has to be approved by both houses of Congress. Some Republicans are against the agreement, but the deal is expected to go through. The markets are optimistic, as Treasury yields dropped sharply on Tuesday in response to the agreement, which was reached on the weekend (US markets were closed on Monday). The 10-year yields are currently at 3.65%, after rising to 3.85% on Friday, their highest level since March.
USD/CAD Technical
- 1.3585 and 1.3515 are providing support
- 1.3685 and 1.3755 are the next resistance lines
Original Post
