Canadian GDP overview
Tuesday's economic docket highlights the release of monthly Canadian GDP growth figures for December, due to be published at 13:30 GMT. Statistics Canada will also release the quarterly growth figures, making this more significant than the ones including only monthly data. Consensus estimates suggest that the economy remained flat during the reported month and expanded by a 1.9% annualized pace during the October-December period. This, however, will mark a slowdown from the 2.9% growth recorded in the previous quarter.
Analysts at CIBC offer a brief preview and explain: “Growth in the Canadian economy continued to cool during the final quarter of 2022 (1.3%), likely clocking in at a pace below the economy’s long-run potential and therefore helping ease inflationary pressures. Continued weakness in commodity prices likely brought a further drop in the overall price deflator and a second successive quarterly decline in GDP in nominal terms. The monthly GDP print for December is expected to show little change in economic activity for that month, although the advance estimate for January should point to at least modest growth for the first month of 2023 if the surge in employment is a reliable guide.”
How could it affect USD/CAD?
Ahead of the key macro release, a goodish pickup in Crude Oil prices underpins the commodity-linked Loonie and drags the USD/CAD pair lower for the second straight day. A stronger-than-expected report will point to an economy that remains resilient. This should be enough to provide an additional boost to the domestic currency and pave the way for deeper losses for the major.
Conversely, a softer reading should reaffirm speculations that the Bank of Canada (BoC) will pause the rate-hiking cycle. This, along with bets for further policy tightening by the Fed, should assist the USD/CAD pair to capitalize on the recent breakout momentum through the 100-day Simple Moving Average (SMA). Nevertheless, the data should infuse some volatility around the CAD pairs and allow traders to grab short-term opportunities.
Key Notes
• Canadian GDP Preview: Forecasts from six major banks, economy cooling, but not stalling
• USD/CAD Forecast: Bulls have the upper hand above 100-day SMA amid Fed rate hike bets
• USD/CAD Price Analysis: Bears lurking at key H4 resistance
About the Canadian GDP
The Gross Domestic Product released by Statistics Canada is a measure of the total value of all goods and services produced by Canada. The GDP is considered a broad measure of Canadian economic activity and health. Generally speaking, a rising trend has a positive effect on the CAD, while a falling trend is seen as negative (or bearish) for the CAD.
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