USD/CAD – Canadian dollar rises on bets BoC to hike after GDP data

Canada Q2 GDP rises on exports and household spending

The Canadian economy surged in Q2, smashing all market expectations, and recorded its best 12-month run in over a decade, securing G7 strongest performer this year.

Canada’s GDP rose at a +4.5% annualized rate in Q2, surpassing market expectations for a +3.7% increase.

Both exports and household spending were the main contributors toward the surprise performance.

The Q2 result likely cements the likelihood of at least one more rate increase from the Bank of Canada (BoC) in 2017. Governor Poloz in July raised its benchmark interest rate by +25 bps to +0.75%.

Fed’s Inflation Conundrum Continues

The Fed’s inflation conundrum shows no signs of letting up in today’s U.S personal-income report.

Today’s data shows that the Fed’s preferred measure of inflation, the price index for personal consumption expenditures, was up +0.1% in July m/m. The price index rose +1.4% in July y/y, matching the y/y index change for prices ex-food and energy.

Note: This July price reading marked the lowest level in nearly two-years – in February, the annual inflation rate was +2.2%, and while core prices were up +1.9% y/y.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell