The Canadian economy grew at an annualized 3.5% compared with a forecast 3.6%, marking a third straight month of a slowing economy. This disappointing reading led the loonie to lose 50 basis points against the greenback. Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins testified to Parliament yesterday afternoon, making the following points:
- Canada is lagging a few years behind the U.S. economic cycle
- For the first time in several years, the economy is running very close to its potential
- The trade deficit reflects a robust economy
- Household debt levels are a concern, while government debt remains relatively low
- The job market is still showing signs of fragility
Today, we expect the U.S. Federal Reserve to hold steady on its key rate at 2 p.m. This decision should not have a material impact on financial markets in general, however, based on the accompanying comments, it could reinforce anticipations of a key rate increase in December, the likelihood of which is currently priced above 85%.
Yusuf Kocagozli
Range of the day: 1.2810 – 1.2945