USD/CAD – Canadian Dollar Awaits GDP Data

Statistics Canada releases Gross Domestic Product data for April today. It is expected to be ugly. Canada’s economic growth is expected to have shrunk 13%, m/m, thanks to the COVID-19 pandemic. The news should not be a surprise to anyone. Arguably, the Canadian dollar may suffer more from a weaker result than it would gain from a better print. Domestic data has not been much of a factor in determining Canadian dollar direction since the pandemic. The key driver is the outlook for the global economy in a post-coronavirus world, and renewed COVID-19 outbreaks are causing concerns.

Those concerns will be readily evident today. U.S. Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin testify before the U.S. House of Representatives. The text of Powell’s opening remarks was released yesterday. His positive comment that “the economy entered an important new phase, sooner than expected,” was offset by his concerns about the issues and challenges to a sustained recovery.

Asia opened with an upbeat tone. The Nikkei 225 rallied, which lifted Asia equity indexes. However, the trend did not continue in Europe. The major indexes are trading mixed with the U.K. FTSE 100 in the red, while the German DAX is modestly higher. S&P 500 futures are flat while U.S. Treasury yields recouped overnight losses. Gold prices (XAU/USD) are trading at the bottom of their overnight range, but the uptrend remains intact.

USD/JPY is trading at the top of its overnight 107.55-107.79 range. Most of the gains due to month-end and quarter-end demand for dollars.

AUD/USD and NZD/USD enjoyed a brief rally from better than expected China Manufacturing and Non-manufacturing Purchasing Managers Index data. The reports send positive signals for the domestic economy, which appears to have put the worst of the pandemic behind. The rally was short-lived, and prices dropped in Europe.

EUR/USD traded in with a negative bias in a $1.1194-$1.1251 band with traders ignoring the higher than expected Euro-zone inflation data. Portfolio re-balancing flows undermined prices ahead of today’s Powell testimony.

The U.K. economy contracted by 2.2% in Q1 2020 q/q and the news undermined GBP/USD. Traders were also unhappy with the U.K. government’s planned £5-billion infrastructure spending program due to the country’s 105% debt to GDP ratio. GBP/USD sank to $1.2260 from $1.2316, with quarter-end flows weighing on prices.

Happy Canada Day tomorrow. The Knightsbridge FX daily report will not be published then.

Rahim Madhavji is the President of, a Canadian currency exchange that provides better rates than the banks to Canadians