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Loonie moves Higher against the Greenback on Canadian Monthly GDP Figures.

Jeffrey Scott

The Canadian Dollar hit its lowest level since September 11th and down 0.2% for the day as continued worries over NAFTA negotiations saw the USD/CAD hit 1.3080 yesterday. There is still a possibility of a NAFTA deal by this weekend should they come to an agreement by Sunday. The release of a weak US durable goods order and a rally in Oil futures by 0.8% saw a brief respite for the loonie trading back to 1.3020 during yesterday's session.

Bank of Canada Governor Stephen Poloz said that the bank would continue to follow a gradual approach to raising rates dependent on how economic data comes to fruition over the coming months and will be carefully watching rising inflation levels for the foreseeable future.

Statistics Canada release monthly GDP figures for July expectations were for a small uptick in growth of 0.1% from last month's 0.0% reading data printed at 0.2% loonie moved higher on the release as market participant factor in further a BOC rate high this month. Raw materials missed as did industrial product prices at -4.6% and 0.5% respectively. Support on the USDCAD is seen at 1.2987 and 1.2945 while resistance is at 1.3029 and 1.3071.

The dollar rose to its highest in more than a week against a basket of major currencies on Thursday, boosted by the Federal Reserve’s outlook for more rate hikes beyond this year. Adding to the move higher was euro weakness on worries about the Italian budget.

On the data front yesterday, we saw the release of U.S. Real gross domestic product (GDP) which confirmed the U.S. economy grew as expected in the second quarter, rising at its quickest rate in nearly four years. US growth was established at an annual rate of 4.2%, according to the final version of Q2 GDP, while for the three months to June, growth was revised to 3.3% from the previous estimate of 3.2%.

Today in the US we had the release of Personal Income for August missing expectations of 0.4 printing at 0.3%. Monthly Personal Consumption Expenditures (PCE) figures missed expectations, but the higher impact figure which is annualized PCE did meet consensus at 2%. Later this morning we have the Chicago Purchasing Managers' Index (PMI) and the Michigan Consumer Sentiment Index for September.

The Euro was one of the worst performing currencies in overnight trading as a last-minute dispute in Italy undermined the currency. Compounding the declines was the strengthening greenback which saw a rise across the board. These factors led to the Euro depreciating approximately 0.8% to open this morning at 1.1580.

Italy was again the epicenter of Euro weakness as their two deputy PM’s, and the Finance Minister were in dispute over a demand for extra spending and thus the overall size of the fiscal deficit. The Italian cabinet met early this morning and agreed a sharply higher public spending plan, sending the Euro downwards. The issues in Italy tarnished an overwise positive day domestically with the German CPI reading surprising to the upside.

Moving into Friday, the Euro turns to some CPI readings across the Eurozone with Spain and Italy both releasing figures. The Eurozone also released CPI figures, Core CPI which excludes volatile components like food and energy faded in comparison to last month and consensus posting a 0.9%, while annualized CPI came in at the consensus of 2.1%. EURUSD first support is seen at 1.1560 while resistance to the topside is at 1.1627.

The cable yesterday touched highs of 1.3162 during European trading following encouraging Brexit-related commentary from the EU’s chief negotiator Michael Barnier. Barnier tweeted that the EU is continuing to work towards an “orderly Brexit” and reinforced that the future partnership with the UK would include a “close economic relationship.” Contrasting this, we also had commentary from Bank of England’s chief economist that Brexit worries are elevated resulting in economic uncertainty.

With no UK macroeconomic datasets released on Thursday, GBP/USD was at the mercy of USD strength following a hawkish assessment of the latest FOMC statement and stronger than expected Q2 GDP growth out of the world’s largest economy. This saw the pound fall to 1.3074 against the greenback during yesterday's NA session where we saw some consolidation ahead of Fridays UK Q2 GDP. UK Q2 GDP came in at expected to show quarterly growth of 0.4%, but annualized missed expectations of 1.3% printing a 1.2%, the pound continues to soften.

On the technical front, immediate GBP/USD support can be seen at 1.3029 and 1.2987 with any topside moves expected to meet resistance at 1.3072 and 1.3114.

The Australian Dollar is weaker this morning when valued against the Greenback. The Aussie hit a 24-hour low of 0.7204 after failing once again to sustain gains beyond the 0.7300 figure.

On the data front last night, we saw the release of soft Chinese industrial profits data during the overnight session. While profits grew 9.2% from a year earlier in August, that was well below the 16.2% level seen in the 12 months to July. There was no scheduled release today for Australia.

From a technical perspective, the AUD/USD pair is currently trading at 0.7211. We continue to expect support to hold on moves approaching 0.7190 while now any upward push will likely meet resistance around 0.7225.

The New Zealand dollar opened yesterday morning at 0.6660 following the release by RBNZ that they would hold interest rates at record lows for the foreseeable future. Guidelines in Governor Orr’s remarks were that the next move could be either up or down but remarked that the cash rate would be around these levels into 2019 and 2020. The central bank also stated that inflation remains in the mid-point of the target range.

The Kiwi/Dollar move downwards for the remainder of the trading session as the greenback gathered strength overnight and continued its momentum following the Federal Reserve’s decision to increase interest rates by 0.25%.

Eventual lows were seen this morning at 0.6598, down 0.75% overnight. The NZD/USD cross continues to test this critical support level to end the week at the US 66 cent handle.