Canada GDP Preview: Economy set to dodge recession as economists predict growth returned in Q4


  • Canadian GDP is expected to have expanded by 0.8% YoY in Q4.
  • Bank of Canada sees GDP coming in flat on an annualized basis.
  • The Canadian Dollar seems to have embarked on a range-bound theme.

The release of the Canadian GDP Growth Rate will be the salient event on the domestic calendar later in the week. According to Statistics Canada, the economy is expected to have expanded 0.8% during the October-December period compared with the same period a year earlier.

Canadian GDP could bolster the cautious stance from the BoC

Following the annualized 1.1% contraction recorded in Q3 2023, the Canadian economy is predicted to have performed very well in the latter part of last year, growing by 0.8% and prompting the BoC to maintain its prudent monetary policy stance.

On the latter, it is worth mentioning that the central bank left its policy rate unchanged at 5.00% at its January 24 event. At that meeting, the BoC suggested that the GDP Growth Rate is now estimated at 0.0%. In case the GDP readings match markets’ consensus, the central bank could maintain intact rates for its fifth consecutive time at its March 6 gathering.

Following its latest monetary policy meeting, the Bank predicts gradual economic growth in mid-2024, with household spending likely to increase in the latter half of the year. Exports and business investment are expected to be boosted by recovering foreign demand, while government spending is expected to contribute significantly to growth throughout the year. That said, the bank predicts GDP growth of 0.8% in 2024 and 2.4% in 2025, which is consistent with its October forecast.

According to analysts at the National Bank of Canada (NBC), “Monthly reports published to date suggest a healthy increase in household consumption in the quarter was only partially offset by a contraction in business investment in both the machinery/equipment and structures segments.”

When will the GDP Growth Rate be released, and how could it affect USD/CAD?

Statistics Canada is set to disclose the GDP figures at 13:30 GMT on Thursday.

Regarding USD/CAD, a positive surprise might lend legs to the Canadian Dollar, leaving the door open to a potential knee-jerk reaction in the short-term horizon. However, such a move should be deemed temporary in the current context where the pair’s price action is almost exclusively driven by USD dynamics. Those dynamics are a consequence of alternating speculation over the potential timing of the Federal Reserve’s (Fed) easing cycle.

FX Street’s Senior Analyst Pablo Piovano notes: “So far, USD/CAD appears side-lined around the critical 200-day SMA near 1.3480. The breakout of this range should expose the so-far 2024 peak at 1.3586 recorded on February 13.”

Piovano adds: “In case of bearish attempts, the 55-day SMA around 1.3430 should offer provisional contention prior to the late January low of 1.3358 (January 31). Once this region is cleared, there are no support levels of note until the December 2023 low of 1.3177, seen on December 27.”

Economic Indicator

Canada Gross Domestic Product Annualized

The Gross Domestic Product (GDP), released by Statistics Canada on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in Canada during a given period. The GDP is considered as the main measure of Canada’s economic activity. The data is expressed at an annualized rate, which means that the rate has been adjusted to reflect the amount GDP would have changed over a year’s time, had it continued to grow at that specific rate. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

Read more.

Next release: 02/29/2024 13:30:00 GMT

Frequency: Quarterly

Source: Statistics Canada

Bank of Canada FAQs

What is the Bank of Canada and how does it influence the Canadian Dollar?

The Bank of Canada (BoC), based in Ottawa, is the institution that sets interest rates and manages monetary policy for Canada. It does so at eight scheduled meetings a year and ad hoc emergency meetings that are held as required. The BoC primary mandate is to maintain price stability, which means keeping inflation at between 1-3%. Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Canadian Dollar (CAD) and vice versa. Other tools used include quantitative easing and tightening.

What is Quantitative Easing (QE) and how does it affect the Canadian Dollar?

In extreme situations, the Bank of Canada can enact a policy tool called Quantitative Easing. QE is the process by which the BoC prints Canadian Dollars for the purpose of buying assets – usually government or corporate bonds – from financial institutions. QE usually results in a weaker CAD. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The Bank of Canada used the measure during the Great Financial Crisis of 2009-11 when credit froze after banks lost faith in each other’s ability to repay debts.

What is Quantitative tightening (QT) and how does it affect the Canadian Dollar?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Bank of Canada purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the BoC stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Canadian Dollar.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD clings to daily gains above 1.0650

EUR/USD clings to daily gains above 1.0650

EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.

EUR/USD News

GBP/USD recovers toward 1.2450 after UK Retail Sales data

GBP/USD recovers toward 1.2450 after UK Retail Sales data

GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.

GBP/USD News

Gold holds steady at around $2,380 following earlier spike

Gold holds steady at around $2,380 following earlier spike

Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.

Gold News

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium

Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in

Bitcoin price shows no signs of directional bias while it holds above  $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research. 

Read more

Week ahead – US GDP and BoJ decision on top of next week’s agenda

Week ahead – US GDP and BoJ decision on top of next week’s agenda

US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.

Read more

Forex MAJORS

Cryptocurrencies

Signatures