The Canadian Dollar has been quite volatile all week, albeit within a fairly narrow one-cent range from USD/CAD1.2820 to 1.2930. It has had many intra-day swings and reversals without really gaining traction in either direction, though this has allowed the CAD to strengthen on many of its major crosses. On Thursday, USD/CAD moved down from a high just under 1.2930 to close around 1.2890 and it opens in North America this morning at 1.2875. GBP/CAD is now down below 1.81 and is more than 2 ½ cents down from Wednesday’s high.
Statistics Canada reported yesterday that real gross domestic product edged down 0.1% in January, offsetting part of the 0.2% growth in December. The decline was mainly the result of lower output of non-conventional oil extraction and decreased activity in real estate. The 20 industrial sectors were evenly split between increases and decreases. The output of goods-producing industries fell 0.4% in January, mainly on lower non-conventional oil extraction. There were increases in the manufacturing and construction sectors. The output of services-producing industries was essentially unchanged in January, as a decline in real estate and rental and leasing was offset by increases in the wholesale, retail, and finance and insurance sectors. This was the weakest monthly growth for services-producing industries in more than a year.
Despite the somewhat softer than expected January outturn, analysts appear in no rush yet to downgrade their GDP estimates. National Bank of Canada, for example, said, “we still expect GDP growth to come out around potential in Q1 (1.5%)… Does it mean that our scenario of 2.5% annual growth in 2018 is at risk? In light of this week’s release of both Ontario and Quebec budgets, we are sticking with our scenario of a subsequent acceleration of growth as pre-electoral gifts will provide a lot of support to the Canadian economy. This assumes, of course, a favorable outcome of NAFTA negotiations in the coming weeks. It would be disappointing to curb a manufacturing sector that is showing a good momentum after years of stagnation." The Canadian Dollar opens in North America at USD/CAD1.2875, AUD/CAD0.9905 and GBP/CAD1.8090.