USD/CAD Canadian Dollar Rises as GDP Data Validates October Rate Hike

The Canadian dollar rose on Friday after the monthly gross domestic product (GDP) beat the forecast with a 0.2 percent gain. The loonie is up almost 1 percent on the final day of the trading week. The currency is still showing a weekly loss against the greenback as NAFTA uncertainty and the U.S. Federal Reserve rate announcement put downward pressure.

The rise today comes with higher expectations of a Canadian interest rate lift in October. The Bank of Canada (BoC) held rates in September ahead of a highly anticipated Fed rate hike in September that came to pass. The US central bank has forecasted another rate hike in 2018 and 2 or 3 more next year as part of its economic projections published Wednesday.

BoC Governor Stephen Poloz spoke on Thursday addressing the rising inflation and Friday’s GDP data point puts a rate hike firmly on the table in the short term.


usdcad Canadian dollar graph, September 28, 2018

NAFTA negotiations have not made big inroads as the US met with Canada with the goal of turning two bilateral agreements into a trilateral one.

With a considerable amount of work still to be done in bridging the gap between US and Canada, the US-Mexico agreement will be published tonight with a possibility of leaving the door open for Canada to join.

It is that possibility that has kept the loonie gaining despite the NAFTA train moving without Canada.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza