USD/CAD: Canadian Dollar Eyes Canadian GDP

05/31/2024

1 minute read

2024.05.31 06:24

The Canadian dollar is showing little movement on Friday, but that could change with the release of Canadian GDP and the US PCE Price index later today. is trading at 1.3660 in the European session, down 0.15% on the day.

Canada’s Economy Expected to Have Flatlined in March

Canada’s economy is expected to have remained unchanged in March, after a weak gain in February of just 0.2% m/m, which was less than expected. The year started out on a high note, as the economy climbed 0.6% m/m in January, but since then the economy has looked sluggish. On an annualized basis, first-quarter GDP is expected to have expanded by 2.2%, compared to 1% in the fourth quarter of 2023.

If today’s GDP report misses expectations, it will put more pressure on the Bank of Canada to lower rates at next week’s meeting. The Bank of Canada has held rates at 5% for six straight times, and restless consumers are looking for some rate relief as they continue to feel the squeeze of elevated rates and the high cost of inflation. The conditions appear to be right for a rate cut, as the economic slowdown has been accompanied by falling inflation.

In April, CPI dropped to 2.7%, down from 2.9% a month earlier. With the headline and core rates below 3%, a rate cut is possible even with inflation above the BoC’s 2% target.

In the US, the Personal Consumption Expenditure Price Index, which is closely watched the Federal Reserve, is expected to remain unchanged at 2.7% y/y and 0.3% m/m, respectively. An unexpected reading could shake up USD/CAD in the North American session. USD/CAD-4-Hour Chart