USD/CAD – Canadian dollar edges higher, US GDP matches estimate

USD/CAD has dipped lower on Thursday, easing the losses seen on Wednesday. Currently, the pair is trading at 1.3495, down 0.18% on the day. On the release front, Canada’s current account deficit narrowed to C$17.3 billion, lower than the forecast of C$18.1 billion. In the U.S., Preliminary GDP came in at 3.1%, matching the forecast. Unemployment claims rose to 215 thousand, just shy of the estimate of 216 thousand. Friday will be busy on both sides the border, so traders should be prepared for some movement from USD/CAD. Canada releases its monthly GDP report, while the U.S. releases inflation and consumer spending data.

As expected, the Bank of Canada maintained the benchmark rate at 1.75% on Wednesday. The rate has been pegged at this level since October, and rate-setters have sounded neutral as which way the next move might go. However, the rate statement was positive in tone, which has raised speculation that the bank could raise rates later in the year. Bank members reiterated their view that the economic slowdown which was felt in early 2019 was temporary. At the same time, members acknowledged the vulnerability of the economy to global developments, stating that global trade risks were “heightening uncertainty” over the country’s economic outlook.

Which way is the Canadian dollar headed?  There are factors which could support a move in either direction. The labor market has improved, and created a record number of jobs in April. Consumer spending, a key driver of economic growth, also remains strong. On the negative side, trade tensions between the U.S. and China have soared, which has hurt risk appetite towards minor currencies like the Canadian dollar. As well, oil prices have fallen, which has weighed on the Canadian currency.