USD/CAD Drops on Canadian Growth Surge, EUR/USD Heads Lower - US Market Open

2019-08-30 13:30:00 Justin McQueen

MARKET DEVELOPMENT – USD/CAD Drops on Canadian Growth Surge, EUR/USD Heads Lower

DailyFX 2019 FX Trading Forecasts

CAD: A volatile year so far Canadian growth with the annualised figure surging to 3.7% (Exp. 3%) from the sluggish Q1 reading of 0.4%. However, while the Canadian Dollar pushed higher amid the better than expected Q2 GDP data, the details of the report are not as impressive, given that personal consumption had been relativelt flat at 0.1%, while business investment fell 1.6%. As such, while this may indeed see the BoC take a more patient approach with regard to possibly jumping on the dovish central bank bandwagon, we do not rule out the potential for the central bank to signal a shift, given risks are tilted to the downside amid the US-China trade tensions. Support in USD/CAD resides at 1.3225, which marks the 38.2% fibonacci retracement of the 1.3565-1.3016 decline.

EUR: A lack of unanimity seems to be the case at the ECB as yet another hawkish member attempts to dampen expectations for a significant easing package at the September meeting. ECB’s Lautenschlaeger stated that it is too early for a huge package, which also follows on from similar rhetoric by ECB’s Knot. However, with Eurozone inflation edging further away from the ECB’s target, the case against a stimulus package becomes increasingly hard. Downside risks remain for EUR/USD, whereby a test of the 1.1000 handle is possible.