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In retail, Black Friday is the day hordes of frugal consumers flock to stores and websites in search of a “deal.” In financial markets, a Black Friday denotes a day of substantial losses. Canadian dollar traders are hoping that today’s September GDP data doesn’t spark a blood-bath for them.
Canada September Gross Domestic Product is forecast to rise by 0.1%, unchanged from the August result. Economists suggest that soft result is due to falling export volumes and broad softness in the domestic economy. Bank of Canada Governor Stephen Poloz warned of weak economic growth in the second half of the year, many months ago, and he is being proved correct. The BoC also lowered their GDP growth forecast to 1.6% for 2020.
If September GDP rises 0.1%, as expected, Canadian dollar weakness may be limited. If September GDP is weaker than expected, it will open the door to speculation of a rate cut as early as next Wednesday. The Canadian dollar will sink. If September GDP surprises to the upside, the loonie will rally.
Today is also month-end which means the usual portfolio re-balancing flows may disrupt FX markets in the run-up to the 11:00 am EST “fixing” time. The robust gains in U.S. equity indices during the month suggest portfolio managers may need to buy Canadian dollars to satisfy mandates. Making things worse, many U.S. market participants take the day after Thanksgiving as a holiday. Thin markets could exacerbate FX volatility.
Asia FX markets were subdued. NZD/USD outperformed, albeit marginally, after New Zealand Consumer Confidence and Building Permits data were higher than expected. AUD/USD was weighed down ahead of Tuesday’s Reserve Bank of Australia monetary policy meeting due to the expected dovish outcome.
USD/JPY managed to hang on to this week’s gains and continues to flirt with its six-month peak. Comments from Bank of Japan officials and mixed to soft Japanese economic reports were ignored.
The British pound had a lively session. Yesterday’s gain after a YouGov poll predicted a Conservative majority was erased in a bout of pre-weekend profit-taking. GBP/USD dropped to 1.2981 from 1.2922. The GfK Consumer Confidence Index was -14, unchanged from October.
EUR/USD drifted lower after weak German and eurozone economic data. German Retail Sales fell 1.9% in October while eurozone inflation was very weak and well below the European Central Bank target.
Canadian dollar traders are looking ahead to a busy week to start December. In addition to Wednesday’s Bank of Canada monetary policy meeting and press conference, Merchandise Trade, Ivey Purchasing Managers Index and employment reports are released.
The U.S. bond market closes at 1:00 pm EST today, and there isn’t any U.S. economic data available.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians