Talking Points:
- Canadian GDP expands 0.2% in November, as expected
- BoC recently ended hawkish guidance
- USD/CAD sets a new 4-year high above 1.1200
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The US Dollar rose above 1.12 against the Canadian Dollar for the first time in four years, despite the fact that Canadian Gross Domestic Product was reported higher for the fifth consecutive month.
Canadian GDP was announced 0.2% higher in November, meeting expectations and slightly below the 0.3% rise in October. The economy expanded 2.6% from November of 2012, meeting expectations and down from 2.7% expansion in the 12 months leading into October, which was the fastest annual growth in over a year.
The Bank of Canada said in January that the direction of its next rate move depends on data flow, this was a shift in previous guidance that up until October mentioned a possible rate hike, but Governor Poloz also specifically said that he is most worried about inflation underperformance. Therefore, better than expected growth could lead to tighter policy, while disappointing growth could bring further accommodation.
Consequently, today’s data may have led to CAD selling because it wasn’t good enough to discourage expectations for looser policy, also the US Dollar rose slightly on an improved personal spending release. Now that USD/CAD is sitting at a new 4-year high, the pair may next see resistance at 1.1234 according to technical analysis.
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USD/CAD 1-Minute: January 31, 2014
Chart created by Benjamin Spier using Marketscope 2.0
-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to instructor@dailyfx.com .
