Canadian economy grew 0.1% – Sliding oil prices undermine dollar
Tuesday 31 January, 2023
Daily Currency UpdateCanadian GDP grew by 0.1% vs the expected 0%. USD/CAD edged slightly lower with the initial reaction and was last seen trading at 1.3437. WTI pauses the two-day downtrend near $78.00 as hopes of an end to the Covid woes renew energy demand anticipations. USD/CAD pair builds on the previous day's solid bounce from the 1.3300 mark and gains strong traction for the second successive day on Tuesday. Apart from this, the worst COVID-19 outbreak in China raises uncertainty about strong economic growth in the country. This overshadows the optimism about a fuel demand recovery by the world's top importer. Furthermore, the expectations for the OPEC+ meeting on Wednesday show a likelihood of keep output unchanged and exert downward pressure on crude oil prices. This, along with a modest US Dollar strength, is another factor providing an additional boost to the USD/CAD pair.
Key MoversAs inflation remains at painful levels in Europe, the ECB is set to take the lead on Thursday. Markets widely assume the ECB will hike interest rates by 50bps with a firmly hawkish tone. The BoE is also expected to raise interest rates by 50bps in the face of high inflation. Although the annual rate fell to 10.5% in December, it is still more than five times the bank’s 2% target. The IMF's winter update was otherwise upbeat, raising the Fund's growth forecasts for the first time in a year, reflecting the reopening of the Chinese economy. The reopening boost was in full force overnight as the official Chinese composite PMI rocketed back into growth territory, hitting a 7-month high of 52.9. Both the manufacturing and services sub-indices rose back above the key 50 threshold that typically indicates growth.
- EUR/CAD: 1.4501 - 1.4583 ▼
- GBP/CAD: 1.6456 - 1.6587 ▼
- AUD/CAD: 0.9407 - 0.9453 ▼
- USD/CAD: 1.3338 - 1.347 ▼