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28 March 2024 | FXGT.com

Canadian GDP and US Q4 Figures to Stir USD/CAD Volatility Today

  • Economic Data Releases: The spotlight is on today’s economic calendar, featuring the Canadian GDP report and the final US Q4 GDP figures, among other data. These releases could significantly impact the USD and create short-term trading opportunities for the USD/CAD pair.
  • Canadian CPI Below Expectations: The most recent Canadian Consumer Price Index data did not meet market forecasts, with essential inflation indicators showing a decline, hinting at a possibility that inflation pressures are subsiding more significantly than anticipated.
  • Labor Market Surpasses Job Creation Expectations: Recent labour market reports have surpassed expectations in job creation. However, there’s been a noticeable decrease in wage growth, a crucial element the Bank of Canada (BoC) considers in its monetary policy decisions.
  • Improvements in Canadian PMIs Despite Contraction: The Purchasing Managers’ Index (PMI) for Canada in February displayed some signs of recovery. Nevertheless, it continues to point towards economic contraction, highlighting ongoing economic challenges within the country.
  • Crude Oil Prices Supporting the CAD: An uptick in oil prices, driven by concerns over tighter global supply and geopolitical tensions, supports the Canadian dollar. This external factor plays a role in limiting the upside potential for the USD/CAD pair.
  • Bank of Canada Rate Expectations: The market consensus anticipates the Bank of Canada will hold its benchmark interest rate steady at 5% during the policy decision on April 10. However, there’s growing speculation that rate reductions could commence as early as June, with projections suggesting that Canadian rate cuts may not be as steep as those expected in the U.S.
  • Rising on Risk Aversion: The pair finds some footing as risk aversion grows in anticipation of the US Personal Consumption Expenditures (PCE) data due for release on Friday.
  • Inflation Data’s Impact: While persistent inflation may trigger a bullish USD response by limiting the Fed’s ability to relax its restrictive policies, any surprising reduction in the PCE index could exert downwards pressure on USD/CAD. Such outcomes would heighten expectations for an FOMC-driven rate cut.

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