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Canadian Q1 GDP growth lower than expected

Published May 31, 2016
  • Canada’s economy picked up less than expected during Q1, rising 2.4% compared with consensus expectations of a 2.9% print
  • More worrisome, the monthly reading showed that GDP in March contracted by -0.2% – worse than the -0.1% predicted
  • Amid the poor headlines there were some bright spots, particularly the 6.9% annualized increase in goods and services exports – a key area the BoC has sought to support recently
  • Meanwhile, the U.S reported that Consumer Spending recorded its biggest increase in more than six years during April…
  • …and PCE core prices (the Fed’s favoured inflation measure) were bang in line with forecast at +0.2%
  • These are strong signals that inflation and labour markets are improving and that rate hikes are coming closer to reality, possibly as early as June or July
  • The Loonie is trading lower following the news, and the USD is higher on an aggregate basis against the majors
  • Oil is steady this morning despite concerns about prices being overstretched in the short term…
  • …OPEC meets Thursday June 2 so we could see some fireworks in the price of WTI and Brent and by extension the Loonie before the week is through
  • Up next is U.S Consumer Confidence at 10am ET – consensus is for a print of 96.2, improving on 94.2 previously

USDCAD Technical Glance
USDCAD remains well supported above its 21 Day Moving Average (DMA) and yield spreads have spiked significantly again in favour of the USD this morning (white).  Risks skewed to USD upside.