Following very poor August GDP numbers which widely missed expectations, the Canadian dollar weakened further. Earlier, we warned that the Canadian dollar was looking oversold (especially relative to the US dollar). After yesterday's GDP numbers, the Canadian dollar is now looking even more oversold. In the short-term time frame, we expect the currency to enjoy at least a small rebound in the near future. In the longer term, the picture for the currency remains bleak. As growth decelerates, NAFTA uncertainties continue and the Bank of Canada shifts to neutral, there are few obvious catalysts for the currency. Despite rising crude oil prices, higher commodity prices have yet to strengthen the Canadian dollar.
The USD/CAD exchange rate is currently above 1.2890. The euro is flat against the Canadian dollar today, but was up sharply yesterday. EUR/CAD is currently above 1.50. Lastly, the pound is up against the Canadian dollar, with GBP/CAD trading above 1.7150.
This week has a few important events on the calendar. Monthly GDP figures for August widely missed expectations (-0.1% vs. 0.1% expected). Later today, we’ll get Markit manufacturing PMIs. Finally, on Friday we’ll get the trade balance and unemployment numbers. Last week, the BoC maintained interest rates and expressed its “caution” regarding future rate hikes.