USD/CAD 10 minutes
The Canadian financial system grew at a 1.0% annualized fee in Q1, which was in-line with forecasts however an additional drilling down within the knowledge highlights a troubling development. GDP was flat in August, then grew simply 0.1% in Sepemteber and the advance estimate for October was +0.1%.
The slowly tempo of progress is additional compounded by plans to shrink the inhabitants in 2025 and 2026. Canada has relied on fast inhabitants progress to spark financial progress, resulting in a pointy flip in public sentiment round immigration. On a per capita foundation, Canadian GDP fell 0.4% within the third quarter, which was the sixth consecutive quarterly decline.
With inhabitants set to fall and the housing market struggling as a consequence of excessive charges, the Financial institution of Canada in a single day fee at 3.75% is needlessly excessive. Additional, the September payroll report yesterday confirmed simply 94,900 jobs created prior to now yr, with the inhabitants rising by greater than 1 million.
That has market contributors break up on whether or not the Financial institution of Canada will reduce by 50 foundation factors or 25 bps. Market pricing continues to favour a smaller reduce however the chance is right down to 61% from 70% earlier than the information.
USD/CAD rose to 1.4040 from 1.4010 within the aftermath of the report however has since pared positive aspects. To begin the week, the pair hit a four-year excessive of 1.4178 as Trump threatened a 25% tariff on Canada. Nonetheless the market is seeing that risk as much less possible now and the pair has slowly recovered.
I spoke extensively in regards to the Canadian greenback and outlook for the forex yesterday on BNNBloomberg.
Video: Answering 5 large questions on the Canadian greenback