USD/CAD: Quiet Ahead Of Canadian GDP

 | Oct 30, 2015 08:12

USD/CAD is flat on Friday, as the pair trades at 1.3160 in the European session. It should be a busy day on Friday, as we await three key events on Friday. The US will release two key events, Employment Cost Index, a key inflation indicator, and UoM Consumer Sentiment. In Canada, we’ll get a look at one of the most important indicators, Canadian GDP. The markets are bracing for a weak gain of 0.1%.

On Thursday, US Advance GDP for the third quarter posted a gain of 1.5%. This was a much softer reading than the Final GDP in Q2 of 3.9%, but was very close to the forecast of 1.6%. Unemployment Claims beat the estimate for a fourth straight week, coming in at 260 thousand. The estimate stood at 264 thousand.

The Federal Reserve policy statement was the highlight of the week, and the currency markets reacted sharply after a surprise hawkish statement from the US central bank. The markets had lowered expectations about a rate hike before the end of the year, but the Fed statement revived the possibility of a December hike, stating that it would raise rates when there is further improvement in the US labor market and when inflation rises closer to the 2% target. The Fed provided some clarity in the following excerpt, something which has been sorely missing from previous statements:

“In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation” [emphasis mine]

The next Fed meeting is mid-December, and the markets will be in alert mode for any further hints about a rate hike. As well, key US numbers will be closely monitored, especially non and inflation data, as the strength of these numbers in the next several weeks will play a critical role in determining whether the Fed will press the rate trigger in December. Still, traders should keep in mind that the markets sometimes overreact to Fed statements or comments from Fed policymakers, and the central bank could easily continue to wait on the sidelines until 2016.

h3 USD/CAD Fundamentals/h3

Friday (Oct. 30)

  • 12:30 US Employment Cost Index. Estimate 0.6%
  • 12:30 US Core PCE Price Index. Estimate 0.2%
  • 12:30 US Core Personal Spending. Estimate 0.2%
  • 12:30 US Core Personal Income. Estimate 0.2%
  • 13:45 US Chicago PMI. Estimate 49.5 points
  • 14:00 FOMC Member John Williams Speaks
  • 14:00 US Revised UoM Consumer Sentiment. Estimate 92.6 points
  • 14:00 US Revised UoM Inflation Expectations
  • 12:30 Canadian GDP. Estimate 0.1%
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*Key releases are highlighted in bold

*All release times are GMT

USD/CAD for Friday, October 30, 2015