USD/CAD finds temporary support below 1.4000, Canadian Q3 GDP in focus

29 Nov 2024, 10:09 by Sagar Dua · FXStreet

USD/CAD finds an interim cushion near 1.3980, investors await Canadian monthly and Q3 GDP data.
The Canadian economy is estimated to have grown by 1% compared to same quarter of the precious year, slower than Q2 growth of 2.1%.
The US Dollar could rebound, given its strong fundamental outlook.

The USD/CAD pair discovers some support near 1.3980 in Friday’s European session. The Loonie pair gauges cushion as the US Dollar (USD) rebounds after posting a fresh two-week low, with the US Dollar Index (DXY) getting some buying interest near 105.60.

The Greenback faces an intense sell-off this week after rallying for almost 12 weeks as the nomination of Scott Bessent for the role of United States (US) Treasury Secretary by President-elect Donald Trump forced traders to trim so-called ‘Trump Trades’.

Bessent’s comments in his interview with the Financial Times (FT) last weekend indicated that he will focus on enacting Trump’s economic agenda without hampering geopolitical harmony. He also favored a reduction in fiscal deficit to 3% Gross Domestic Product (GDP), a scenario that won’t be inflationary for the US economy.

However, market experts are confident about the US Dollar’s outlook. Analysts at Brown Brothers Harriman said in a note, “The US dollar falls against other major currencies as end-of-month portfolio rebalancing weighs on the currency.” They added, “The more favorable US economic outlook relative to other major economies suggests the fundamental dollar uptrend is intact.”

Think tanks of financial markets are upbeat over the US economic outlook, given its strong GDP growth and potential Trump tariff policy, which would boost demand for domestically-produced goods and services.

In Friday’s session, investors await Canada’s September month and Q3 GDP data, which will be published at 13:30 GMT. The Canadian GDP is estimated to have grown by 0.3% after remaining flat in August. On a year-on-year basis, the economy is expected to have expanded by 1% slower than 2.1% growth in the previous quarter of this year.

Weak GDP numbers would boost expectations for the Bank of Canada (BoC) to cut interest rates again by 50 basis points (bps) in the December monetary policy meeting. The BoC also reduced its key borrowing rates by 50 bps in October.

Economic Indicator

Gross Domestic Product Annualized

The Gross Domestic Product (GDP), released by Statistics Canada on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in Canada during a given period. The GDP is considered as the main measure of Canada’s economic activity. The data is expressed at an annualized rate, which means that the rate has been adjusted to reflect the amount GDP would have changed over a year’s time, had it continued to grow at that specific rate. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.