Canadian dollar falls after soft GDP
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<li>Canada’s GDP contracts in second quarter</li>
<li>US nonfarm payrolls, wages point to weak US labour market</li>
</ul>
<p>The Canadian dollar is unchanged early in Monday’s North American session, trading at 1.3594.</p>
<p><strong>Canada’s GDP unexpectedly soft in Q2</strong></p>
<p>The Canadian dollar posted gains throughout last week but surrendered all of those gains on Friday after second-quarter GDP was softer than expected.</p>
<p>Canada’s economy contracted in the second quarter by 0.2% y/y, much weaker than the consensus of a 1.2% gain. The Bank of Canada was also taken by surprise, as it had projected a gain of 1.5%. The economy has slowed sharply since the first quarter, which showed GDP at a revised gain of 2.6%. The BoC’s rate hikes continue to filter throughout the economy, which may be in a slight recession, as June GDP contracted by 0.2% and July is expected around zero.</p>
<p>The GDP report was the last major domestic release before the BoC meeting on Wednesday. The soft data has cemented a pause from the BoC, after two consecutive meetings in which the BoC raised rates by a quarter-point but said that the decisions were a close call between a hike and a hold. The BoC odds for a hold have jumped to 97%, up from 78% prior to the GDP release. With a pause a virtual certainty, investors’ focus will be on the rate statement. Goldman Sachs is projecting a pause and one final rate hike in October.</p>
<p>In the US, the August employment report pointed to a cooling labour market. Nonfarm payrolls came in at 187,000, the third straight release below 200,00. Wage growth fell to 0.2% in August, down from 0.4% in July and below the consensus of 0.3%. The weak jobs report raised the odds of a Fed hold at the September meeting to 93% according to the FedWatch tool, up sharply from 78% just a week ago.</p>
<p>.</p>
<p><strong>USD/CAD Technical</strong></p>
<ul>
<li>USD/CAD is putting pressure on support at 1.3573. Below, there is support at 1.3509</li>
<li>1.3657 and 1.3721 are the next resistance lines</li>
</ul>
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