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Canadian GDP Numbers Mixed as Exports Decline and Imports Increase

Posted on: May 31, 2017

A quite session yesterday as the US and the UK returned from their extended weekends. A wider than expected Canadian trade balance caused USDCAD to take a run at 1.3500 where it was met with significant selling. The Euro was able to shake off a softer CPI number and gain ground against a heavy USD, at least until Draghi hits the tapes next week.

Overnight Sterling was the currency to watch, as a YouGov poll came out during the Asian session suggesting that Teresa May’s party would lose her majority, causing Cable to drop 60 pips breaking below 1.2800 briefly. GBPUSD has recovered though as the confidence interval of the prediction was revealed to be quite high, casting a shadow over the legitimacy of the results. Expect this headline trading to continue until election day as uncertainty grows. On the data front, this morning Canadian Q1 GDP was not able to meet lofty expectations of 4.2%, coming in at 3.7%. An increase in imports combined with a decrease in exports weighed on the headline number. However, year-over-year and month-over-month beat expectations (3.2% vs 2.9% and 0.5% vs 0.2% respectively).

For those watching USDCAD, broad USD heaviness is helping to keep a cap on USDCAD despite slipping oil prices and wider rate spreads. The headline miss in CAD GDP aside, the beats in month-over-month and year-over-year GDP are certainly CAD positive. WTI managed to hold trend line support around $48 with short term resistance of $52.50 up ahead coming off the February high. We saw strong selling around 1.3500/10, look for that provide initial resistance to a topside move. I still think we grind away here, but a move below 1.3400/10 could spark a quick move down as short term CAD shorts cut and run.

  • Yesterday’s NA Range 1.3452 – 1.3506
  • Asia Overnight Range 1.3445– 1.3473
  • London Overnight Range 1.3437– 1.3470

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