USD/CAD: Loonie to benefit at best moderately on significant Canadian GDP data surprise – Commerzbank
Canadian GDP data for Q1 is due for publication today. Economists at Commerzbank analyze how growth data could impact the Bank of Canada rate hike expectations and its implications for the Loonie.
BoC’s rate expectations have risen in connection with the Fed
“The data is likely to confirm that the economy has remained robust despite massive rate hikes. The flash estimate for April will signal whether the same also applies for the beginning of the second quarter.”
“Robust economic data and continued high inflation rates had led to a rise in rate hike expectations. The market has already gone a long way as according to the OIS-based market expectations the market is pricing in a terminal rate close to 4.9% at year-end, that means two further 25 bps rate steps are expected until then.”
“Today’s data would have to surprise significantly on the upside to fuel the BoC rate expectations further. The Loonie is going to benefit at best moderately from that against USD as the market rate expectations have also risen in connection with the Fed. As a result, the differential in rate expectations has not widened.”
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FXStreet Insights Team
FXStreet
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