The Canadian dollar firmed up after October GDP came in at the fastest pace in 5 months as manufacturing bounces back and almost fully offsets declines in August and September. The month on month reading grew at 0.3%, higher than the 0.2% analysts’ eyed, and an improvement from the -0.1% reading from the prior month. The construction sector declined for the fifth consecutive month in October, edging down 0.1%.
Retail sales for Canada was also released simultaneously and missed across the board with downward revisions. Sales for October posted 0.3% growth, an improvement from the downward revision reading of 0.1%, but a miss of the 0.5% economists expected.
The loonie gave back its gains however after the November BOC Business Outlook Surveyed indicator decreased slightly but was still elevated, signaling that business sentiment overall continues to be positive. Overall, firms no longer anticipate capacity pressures to intensify, pointing to increases in investment and employment that expand productive capacity, and expectations that demand in the Prairies and around housing in some regions will moderate.
The mixed survey and data, the last before the Bank of Canada rate decision on January 9th is unlikely to change anything. We may not see the central bank consider a hike until the summer.
Price action on the USDCAD daily chart shows the strong bullish upswing is poised for the 7 consecutive day. If price closes above the 1.3550 level, bullish momentum could target the 1.3760. It is around that area price could form a bearish butterfly pattern.