Canadian Dollar Steady Ahead of GDP

Canadian Dollar Steady Ahead of GDP

The Canadian dollar continues to trade quietly. In the Wednesday session, USD/CAD is trading at 1.2905, down 0.14% on the day. On the release front, Canada releases the monthly GDP report and the Raw Materials Price Index. There are a host of key indicators in the US, led by unemployment claims and consumer confidence. The markets are expecting unemployment claims to tick higher to 230 thousand, while UoM Consumer Sentiment is forecast to rise to 131.2 points.

The US economy continues to show strong expansion. Revised GDP for the third quarter came in at 2.9%, beating the estimate of 2.7%. This reading was revised upwards from the initial GDP estimate of 2.5%. Fourth quarter growth, although solid, could not keep up with a superb third quarter, which posted a gain of 3.2%. As for 2018, first quarter growth is expected to soften to 1.8%, but there is still a strong chance that the economy could hit 3% growth this year, as promised by US President Trump. The catalysts for such a rosy prediction are the massive tax cut and higher government spending. Where does this leave the Federal Reserve, which raised interest rates last week? Currently, the Fed is projecting to more rate hikes this year, but if the economy remains strong and inflation levels move closer to the Fed target of 2%, we could see four rate increases in 2018.

Negotiations over the NAFTA agreement continue, and positive statements from US negotiators have raised hopes that a new agreement will be reached between Canada, Mexico and the US. A key sticking point has been a US demand to increase the US content in vehicles made in NAFTA members, but the Trump administration has apparently backed down on this requirement. The gloomy air around the talks has improved, and there is cautious optimism that the sides can hammer out a new agreement in the next few weeks.

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