Canada has released data on Canada's Gross Domestic Product (GDP) for Q4, which indicates no growth with a 0% quarter over quarter increase. This figure falls short of the expected 2.9% increase, with the decline in business investment and inventory accumulations being cited as the primary reasons for the weaker growth.
This report suggests that the Bank of Canada (BoC) is unlikely to raise interest rates further, as it may dampen weak economic growth by increasing borrowing costs. The BoC had already announced that it would pause rate hikes during its last monetary policy meeting, and this GDP data reinforces the promise. This news is unfavorable for the Canadian dollar (CAD), and it is expected that the USD/CAD currency pair will strengthen further, as the US Federal Reserve (Fed) is still anticipated to continue its tightening cycle. Some pundits now speculate that the Fed could raise rates as high as 6%, which is creating buzz in financial markets.
USD/CAD Technical Outlook
- Following the release of this data, the USD/CAD rose, reaching a daily high of 1.3609.
- However, after the initial reaction to the news, the major retraced and settled in the 1.3590s range.
- The USD/CAD pair looks bullish in general, but there is a certain amount of noise just above that will be difficult to break out from.
If we do, this pair could find itself reaching towards the 1.38 level again, which was the high in November. However, the oil market could have something to say before it is all said and done, as the Loonie is highly influenced by crude oil prices.
The pair has broken above several moving averages on the way up, so one would have to think that perhaps systematic traders are bullish as well as this point in time. The dollar has been like a wrecking ball against almost everything as of late, while the lack of growth in Canada will continue to be a major issue for the Canucks. The housing issues unwinding in the Great White North also have a detrimental effect on the Loonie as well, and now that the Bank of Canada looks unlikely to raise rates anytime soon, its likely that will eventually see the CAD lose value, not only against the greenback, but also other major currencies such as the British Pound, Euro, and Franc. Nonetheless, this pair will probably be choppy, regardless of its trajectory.
Ready to trade our Forex daily analysis and predictions? Here are the best forex brokers accepting Canadian clients to choose from.