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Canadian Dollar Halts Skid on Stronger than Expected Q1 Figures

By May 31, 2023June 8th, 2023No Comments

Wednesday’s release of Canadian GDP data surpassed expectations, with the annualized growth rate registering at 3.1%, exceeding the projected range of 2.3% to 2.5%. Will GDP growth, along with strong employment figures and a resurgent real estate sector, be sufficient to prompt the Bank of Canada to raise interest rates at their upcoming meeting on June 7th? That’s the trillion-dollar question.

Market analysts are currently calculating a 35% probability of a rate hike in June and a higher likelihood of 60% for a rate increase in July. This shift in market expectations represents a significant departure from the consensus a few months ago, which leaned towards potential interest rate cuts in the latter half of the year.

Following the release of the stronger-than-expected GDP figures, the Canadian dollar gained approximately half a cent against the US dollar and is currently trading at 1.3580 (USD/CAD). More broadly, the Canadian dollar has struggled to surpass the 1.365 (USD/CAD) level against the US dollar despite several attempts. This indicates that there is strong resistance at the 1.365 level for the USD/CAD pair. Given that the stronger GDP figures will reduce the downward pressure on the Canadian dollar, it is unlikely that a breakthrough beyond the 1.365 level will occur in the near future. In our view, anything above 1.35 is good value for US dollar sellers, while US dollar buyers should be looking to buy below 1.369 for their immediate needs.

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