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Canadian Q2 GDP surges putting more bets on for a September rate hike

Posted on: August 31, 2017

This morning was another Canadian GDP release and once again we got a surprise to the upside. Q2 growth came in at 4.5% compared to expectations of 3.7% and MoM came in at 0.3% compared to expectations of 0.1%, a beat across the board. Consumption and exports were the main drivers in a fairly solid report. The ball is now in Mr Poloz's court, as the odds of a September rate hike by the Bank of Canada next week creep up. While September may still qualify as a surprise, October is indeed looking more like a formality if they don't go in September and if we keep seeing prints like this. USDCAD first support sits around 1.2540/50 with key support still around 1.2414/34.

In the US, jobless claims came in slightly better than consensus, while personal income also came up a tick and personal spending missed by a tick. Strong consistency in wages and salaries has shown to be a sign of wage traction and employment. M/M Inflation however, does not look at rosy, up only 0.1% for both overall and the core. Later this morning we get Chicago PMI and Pending Home Sales, with tomorrows Non-Farm Payrolls report being the key data point this week.

Amid all of the political and economic uncertainty as a result of Brexit, GBP/USD continues to slump. Comments from the BoE's Michael Saunders, supported the prospect of a modest interest rate hike, but that was largely ignored by the market and did little to support GBP's depreciation against 13 of its 16 major peers. Theresa May's candidacy in the future is also coming into consideration after the Conservative's poor performance in June after the snap elections. While May said she would continue to run for re-election, many senior officials are casting their doubts.

  • Yesterday's NA 1.2543 - 1.2637
  • Asia 1.2619 - 1.2663
  • London 1.2550 - 1.2663

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