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Canadian dollar ends week with gains



Monday is Monday in the US, Canada and Canadian markets. At the beginning of the new trading week USD/CAD has shown very little movement.

Canada’s GDP stays steady

Friday was a busy day ahead of Christmas. Canada’s GDP remains steady, with a modest 0.1% gain in November, identical to the October release. In the fourth quarter, GDP growth is expected to be 1.2% y/y. This is not a great result but it is still respectable. More importantly, the reading is higher than the Bank of Canada’s forecast of 0.5% growth in Q4.

There had been speculation that the Bank of Canada might pause its current tightening cycle at the January meeting, but this now seems unlikely, due to the stronger-than-expected GDP and last week’s mixed inflation report. Although headline inflation fell to 6.8% from 6.9%, core inflation is still higher than expected. Future rate increases would be dependent on data, so the Bank is unlikely not to pause when inflation and GDP aren’t slowing down. The chances of a 25 basis point increase in January increased to just under 66% after the GDP release.

US PCE Price Index declines

The US appears to be experiencing an increase in inflation, which raises hopes that…

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