- USDCAD drops almost 100 pips on strong Canadian data
- GDP M/M rises 0.3% vs 0.1% expected
- US PCE comes in inline with forecasts. Initial jobless claims tick higher
The recent string of economic data from Canada has been impressive, with today’s GDP beat further supporting the notion that the economy is performing well. The month on month rise in GDP of 0.3% was better than the 0.1% expected and whilst it is below the prior reading of 0.6% it means that the annualised reading is now at its highest level since 2011.
Canadian GDP Q/Q has risen to its highest level in annualised terms since 2011. A strong bounce back in net exports was one of the main contributors to the impressive reading. Source: XTB Macrobond
Looking at the individual components of the release, net exports are of particular interest. As you can see from the chart above these have bounced back strongly after a fairly large drop seen previously.
At the same time as the Canadian data we had two releases from the US, although neither provided much insight into the strength of the world’s largest economy. The core PCE price index came in inline with forecasts in month on month terms, rising by 0.1%. A rise of 2k in the initial jobless claims is almost inconsequential as this labour market indicator continues to be extremely robust in historical terms – as has been the case for a couple of years.
In terms of market reaction the Canadian dollar has soared across the board with USDCAD dropping by almost 100 pips since the release.
A 1 minute chart of USDCAD reveals the large drop lower seen since the data releases. Source: xStation
In an earlier post for an NFP preview we noted that the USDCAD could be an interesting pair to follow over tomorrrow’s release. The market has held its prior lows just above the 1.24 handle and formed a possible double bottom. Today’s data has seen much of Wednesday’s gains wiped out however and a move back to the lows could be on the cards should NFP disappoint tomorrow.
On a daily chart the USDCAD may have formed a double bottom just above 1.24. Today’s data could threaten the latest move higher however. Source: xStation