BoC lowers 2021 growth forecast to 5.1% from 6%

Eren Sengezer FXStreet

The Bank of Canada (BoC) said in its fall Monetary Policy Report (MPR) that it lowered the 2021 Gross Domestic Product (GDP) growth forecast to 5.1% from 6% in July's MPR.

Key takeaways from MPR as summarized by Reuters

"2021 Q2 annualized GDP was -1.1% (vs +2.0% in July MPR), Q3 annualized GDP seen +5.5% (vs +7.3%), Q4 annualized GDP seen +4.0%."

"Output gap was between -2.25% to -1.25% in Q3, smaller than revised estimate of -3.25% to -2.25% in Q2."

"Significant uncertainty surrounds outlook for GDP and potential output."

"Canada Q4 annual inflation rate likely to hit 4.8%; around one-third of this will come from higher energy prices."

"Overall Canada 2021 inflation seen at 3.4% vs 3.0% in July MPR, 2022 inflation seen at 3.4% (2.4%) dipping to around 2% by end 2022, in 2023 seen at 2.3% (vs 2.2%)."

"Realization of upside risks to inflation could lead to rise in inflation expectations along with more pervasive labor cost and inflationary pressures."

"Canadian economy is once again growing robustly; labor market recovery is well under way but incomplete."

"Potential output growth to average about 1.6% per year over 2021-23, down 0.2 percentage points from July MPR."

"US growth seen +5.6% in 2021 vs +6.6% in July MPR, +3.9% in 2022 (vs +5.1%) and +2.7% in 2023 (vs +1.8%)."

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

GBP/USD loses momentum, flirts with 1.3200

GBP/USD is struggling to maintain its positive bias on Thursday, retreating toward the 1.3200 region in response to the pick in the buying interest around the Greenback. That said, Cable remains under scrutiny as cautious market sentiment keeps investors focused on the US-Iran conflict and political effervescence in the UK.

EUR/USD trims gains, challenges 1.1400

EUR/USD now gives away part of its earlier advance, receding toward the 1.1400 contention zone on Thursday. Meanwhile, the pair’s recovery comes amid extra losses in the US Dollar, at the time when while investors continue to monitor developments in the Middle East and sentiment surrounding global technology stocks.

Gold remains bid and close to $4,100

Gold accelerates its recovery and approaches the key $4,000 mark per troy ounce at the end of the week, adding to Thursday’s advance. However, expectations for a hawkish Fed remain steady and keep the yellow metal’s potential upside contained.

Crypto Today: Bitcoin at $60,000, Ethereum at $1,500, and XRP at $1 face a make-or-break test

Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) are trading in the red on Friday after three consecutive days of losses, testing their respective make-or-break support levels.

Week ahead – NFP report to challenge Dollar strength and the hawkish Fed

Dollar strength dominates markets, as the hawkish Fed overshadows geopolitics and lower oil prices. NFP week could drive September Fed hike expectations and boost market volatility. The euro lacks fresh bullish catalysts, all eyes on the preliminary inflation report and the ECB Forum.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.