- U.S. Fed’s FOMC and GDP Data Punish Loonie
- Canadian GDP Expected Flat and Flirting with Recession
- Oil Prices Recover but Not Enough to Offset Strong USD
The USD/CAD is rallying after the release of the U.S. gross domestic production (GDP) figures for the second quarter of the year saw a 2.3 percent rise. The figure is slightly below the expectations of 2.5 percent, but the report also announced an upward revision on the first quarter GDP data. The terrible 0.2 percent contraction has been updated to show a 0.6 percent positive growth number. The loonie had managed to strengthen to below 1.30 as the USD faced some profit taking ahead of the Federal Open Market Committee (FOMC). The statement by the monetary policy setting committee of the Federal Reserve was not conclusive, although there were favorable comments about the employment component that could signal the first interest rate hike taking place in September.
The USD/CAD currency pair started the trading session at 1.2956 but kept appreciating before the GDP figures were released. After the mostly positive growth numbers and revisions the pair broke through the 1.30 price level, but was stopped by the 1.3030 level when the rally started losing some steam. The pair is trading at 1.3005 with investors eyeing the Canadian GDP release on Friday, July 31 at 8:30 am as a catalyst of another currency move.
Crude was trading higher after Wednesday’s release of U.S. inventories which surprised to the downside. Lower global demand and a supply glut of the black stuff built anticipation for healthier inventories. The move in oil prices was able to give the CAD something to fight off the USD rally if only up to a certain point.
The Canadian economy is flirting with a return to a recession after the first quarter -0.6 percent GDP growth. Statistics Canada (Statcan) releases a monthly GDP figure 60 days after the end of the month. Tomorrow’s release will be for May’s data. Canada’s GDP shrank by 0.1 percent in April’s monthly data (released in June). The technical definition of a recession is two consecutive quarters with negative growth. The forecast for tomorrow’s Canadian GDP figure is for a reading of 0.0 percent which will still leave a huge hurdle that the economy would have to overcome as the June data is prepared for release on Tuesday, September 1.
CAD events to watch this week:
Friday, July 31
8:30am CAD GDP m/m
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar