Canadian GDP Preview: Rebound growth numbers eyed by the BOC, NAFTA fate feared

Canada's Q2 GDP was likely much better than Q1.
A high growth rate will drive interest rates higher.
Any NAFTA headlines impacting future growth can overshadow past growth figures

Yohay Elam FXStreet

Canada releases Gross Domestic Product data on Thursday, August 30th, at 12:30 GMT. Canada is unique in publishing GDP on a monthly basis contrary to other countries that do so only a quarterly basis. The upcoming event is for June, concluding the second quarter. So, Canada also makes public the annualized quarterly growth rate, making this event more significant than the ones including only monthly data.

Expectations and potential reactions

The Canadian economy grew by a meager annualized growth rate of 1.3% in Q1 2018. A slow advance was also seen in Canada's neighbor, the US, and even in Europe, among other places. A relatively harsh winter was one of the reasons for the moderation.

The second quarter has seen a pickup in growth. The US has seen a 4.1% annualized according to the first release, the highest pace in four years and Canada is expected to enjoy a leap as well.

A quarterly growth rate of 3% is on the cards for Q2. Any dip below the round number may weigh on the loonie, and a beat will push it higher. If quarterly growth meets expectations, the focus will likely shift to the monthly report for June. Here, a modest increase of 0.2% is forecast after 0.5% beforehand. Any surprise in the monthly figure may indicate a new trend.

BOC watching

The Bank of Canada raised rates recently and maintained its hawkish bias. Governor Stephen Poloz and his colleagues indicate further rate hikes. The publication comes less than a week before the next rate decision by the BOC on September 6th. The September meeting does not include a press conference, and the likelihood of a hike is low.

However, the Ottawa-based institution may opt for another increase in the Overnight Rate in October. Growth figures may impact the odds of such a move and consequently, the Canadian Dollar.

New NAFTA looms

NAFTA negotiations have been behind many significant moves in the loonie in recent months. The GDP data report comes just days after the US and Mexico announced an agreement. The deal between Canada's North American neighbors is expected to include Canada after the US and Mexico have resolved their issues. The optimism pushed the C$ higher.

However, President Trump toughened his stance against Canada and seems to have adopted a "take it or leave it" approach. Mexico, always calling for a trilateral deal, has also opened the door to excluding Canada.

Frantic negotiations are going on Washington. The Canadian economy heavily depends on demand from the US. A successful conclusion of the talks will boost the Canadian Dollar on hopes for upbeat growth in the future while ignoring Q2 data. A breakdown will send the loonie plunging, as a future recession makes Q2 figures irrelevant as well.

The situation is evolving.

More: New NAFTA: Trump wants to corner Canada, but will Congress let him?

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold looks vacillating above $4,150

Gold alternates gains with losses below the key $4,200 mark per troy ounce on Friday. The yellow metal’s irresolute price action comes in response to a modest pullback in the US Dollar and a tepid recovery in US Treasury yields across the board.

Bitcoin steadies at $82,000: The five forces crushing the Uptober rally

Crypto markets have remained under pressure so far in October, with Bitcoin (BTC) sliding below $80,000 earlier this week before recovering to around $82,000 on Friday, as macroeconomic headwinds and cooling demand weigh on the market.

The Fed just got a second hot inflation number. Here's what the diesel signal is really saying

The Federal Reserve (Fed) faces a renewed inflation challenge after two consecutive reports showed price pressure intensifying across the US economy. September's Consumer Price Index (CPI) confirmed accelerating consumer inflation, while the Producer Price Index (PPI) revealed an even sharper rise in business costs. Behind both reports lies a common factor: energy prices.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.