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USD/CAD Moves Higher as Canadian GDP Unexpectedly Declines

Published October 31, 2017
  • Economic data releases out of Canada this morning showed that month-on-month Canadian GDP declined by -0.1% versus growth expectations of 0.1%; raw material prices and price of goods sold by manufacturers experienced similar declines.
  • This drop in GDP mostly resulted from a sharp slowdown in manufacturing, mining, quarrying, and oil and gas extraction in Canada; losses from these sectors outweighed the growth experienced in 12 out of 20 other sectors of the Canadian economy.
  • Raw material prices experienced a sharp decline in growth mostly due to lower prices for motorized and recreational vehicles, meats, fish and dairy products; higher energy prices helped offset this decline in growth.
  • USD/CAD is hovering near 1.2900 as the market continues to weigh this relatively poor economic data against comments from the Bank of Canada; BoC Governor Stephen Poloz iterated that his central bank will be largely focused on Canadian economic data going forwards.
  • Stephen Poloz is set to speak before the House of Commons Standing Committee in Ottawa at 3:30 PM EST; investors will look for clues on Poloz’s guidance on monetary policy in light of today’s data release.
  • The US Federal Reserve kicked off their 2-day policy meeting today; this meeting will have a smaller impact as the Fed is expected to keep rates the same and investors are more focused on US President Donald Trump’s pick for the next Fed chair on Thursday.
  • US politics slightly moved market sentiment to risk-off territory as developments in the Trump-Russia probe unfolded; two members of Trump’s election campaign, including a former campaign manager, received a litany of charges relating to fraud and conspiracy against the United States.
  • Inflation out of the euro zone slowed more than expected this morning, lending credence to the European Central Bank’s decision to show increased caution in monetary tightening; political strife in Spain is beginning to subside as Catalan separatist leader Carles Puigdemont fled to Belgium in the wake of Spanish control of Catalonia.