The USDCAD exchange rate could swing this week with GDP growth figures from the US and Canadian economies.
USDCAD – Daily Chart
USDCAD hit the 1.36 level on Wednesday. The coming sessions will determine if this becomes another resistance level, like in December.
On Wednesday, the US dollar was boosted by its GDP figures, which were just 0.1% lower than expectations. The number still dipped from 4.9% in the previous quarter, and a strong consumer boosted it.
“Though weather wreaked havoc on some of the data for January, including retail sales, housing starts, and home sales, risks are still weighted toward the upside for growth early this year,” Oxford Economics analysts said. “A weather-related rebound in activity in February coupled with a recent surge in tax refunds should provide a boost to growth in retail sales.”
Economists surveyed by Reuters had expected growth to be unrevised for the previous quarter, but private investment numbers were slightly weaker. Traders jumped on the consumer spending aspect and pushed the dollar higher.
Consumer spending made up two-thirds of economic activity in the United States and was 3% higher, beating estimates of 2.8%. Domestic demand was also stronger than expected, growing at 2.9% versus 2.6%.
Attention now turns to the Canadian growth figures released at 9:30 pm HKT on Thursday. The numbers are expected to come in at 0.8% for Q4, an improvement from the -1.1% in the previous reading. That highlights the strength of the US economy and why the greenback was pushed higher on Wednesday. Although traders expect the Federal Reserve to cut interest rates, other countries are seeing a deeper slowdown in growth.
