By Ketki Saxena
Investing.com – The Canadian dollar was little changed against the US dollar today, but amongst the strongest major currencies today and the only G10 currency to record a gain vs. the USD.
The Canadian dollar gained a boost from GDP data, which came in mixed. The Canadian economy contracted at an annualized rate of 1.1% in the third quarter, but avoided a technical recession as the previous quarter’s figures saw a sharp upward revision from -0.2% to 1.4%.
While a hold from the BoC next week is widely expected markets will be closely watching for commentary accompanying the decision as traders aim to ascertain by when and how aggressively the Canadian central bank will begin cutting rates.
Analysts at ING expect a hawkish hold, noting that “Preference of the BoC to keep the policy message hawkish is clear, given lingering risks to the disinflation outlook.”
In terms of the decision’s impact on the loonie, they note that the “CAD may rise on a hawkish hold, but don’t expect the FX impact to be very long-lasting”.
They note that “data and the spill-over from Fed pricing – remain significantly more important for the CAD swap curve.”
Into the new year, ING analysts note that they “don’t see the loonie as a particularly attractive currency into the first months of next year given its very high correlation to US data, which we expect to deteriorate in 1H24. Other commodity currencies like AUD and NOK are more appealing.”