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GDP is expected soon in Canada, and it’s expected to show a contraction of 0.6%. There are three reasons why it could surprise to the upside. Here’s why.

Canada publishes its GDP on monthly basis. This is unique. While the consensus is for a contraction of 0.6%, some conditions have improved lately, and could indicate a surprise, even showing growth rather than contraction.

US has stabilized:  American Economy seems to have stabilized: Canada is very dependent on the US. It exports lots of good to its neighbor down south. Housing data in the US has stabilized and even risen from the bottom. This has been seen in various housing indicators, as well in Core Durable Goods Orders. So, a stronger America means a better off Canada.

Rise in Oil Prices: Oil Prices have risen lately. Oil traded lately above $50, after drifiting in the low 40s earlier this year. Canada, being an exporter of oil, benefits from the bottoming of oil prices. This is a major factor in GDP, something that should add to growth.

Forex Market: USD/CAD has declined today. It now trades at 1.25, falling from 1.2650, the peak yesterday. In previous events that involved the Canadian dollar, the market had a good notion about how the data would turn out. This happened with Trade Balance in particular.

USD/CAD to your mobile Mobile Price Alert

So, all these factors together bring me to a conclusion that Canadian GDP could surprise to the upside. I’ll update this post when the data is published to see if my prediction was right or wrong. Oh Canada!

Update 12:42 GMT: Canadian GDP fell by 0.7%, slightly lower than everybody, including myself expected.

But there is a positive change in the Canadian economy:  RMPI rose much more than expected: 1.7%, contrary to expectations of 0.2%. This big gap indicates that the next GDP will be better. Currently, the USD/CAD is trading lower – meaning that the Canadian dollar is strengthening.

So, I was wrong with GDP, but at least for now, the Candaian dollar is getting stronger.

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