- Canada’s GDP contracts in second quarter
- US nonfarm payrolls, wages point to weak US labour market
The Canadian dollar is unchanged early in Monday’s North American session, trading at 1.3594.
Canada’s GDP unexpectedly soft in Q2
The Canadian dollar posted gains throughout last week but surrendered all of those gains on Friday after second-quarter GDP was softer than expected.
Canada’s economy contracted in the second quarter by 0.2% y/y, much weaker than the consensus of a 1.2% gain. The Bank of Canada was also taken by surprise, as it had projected a gain of 1.5%. The economy has slowed sharply since the first quarter, which showed GDP at a revised gain of 2.6%. The BoC’s rate hikes continue to filter throughout the economy, which may be in a slight recession, as June GDP contracted by 0.2% and July is expected around zero.
The GDP report was the last major domestic release before the BoC meeting on Wednesday. The soft data has cemented a pause from the BoC, after two consecutive meetings in which the BoC raised rates by a quarter-point but said that the decisions were a close call between a hike and a hold. The BoC odds for a hold have jumped to 97%, up from 78% prior to the GDP release. With a pause a virtual certainty, investors’ focus will be on the rate statement. Goldman Sachs is projecting a pause and one final rate hike in October.
In the US, the August employment report pointed to a cooling labour market. Nonfarm payrolls came in at 187,000, the third straight release below 200,00. Wage growth fell to 0.2% in August, down from 0.4% in July and below the consensus of 0.3%. The weak jobs report raised the odds of a Fed hold at the September meeting to 93% according to the FedWatch tool, up sharply from 78% just a week ago.
USD/CAD Technical
- USD/CAD is putting pressure on support at 1.3573. Below, there is support at 1.3509
- 1.3657 and 1.3721 are the next resistance lines
(Source: Market Pulse), all rights reserved by original source.