Happy Friday, traders! Are you ready to trade at the end of the week? Here’s what you need to know before you start:
How Will GDP Impact CAD?
What will happen?
Statistics Canada will announce the change in Gross Domestic Product on March 31. This release, published 60 days after the month ends, shows the change in the inflation-adjusted value of all Canadian goods and services. Gross Domestic Product is one of the best indicators of a country’s economic performance. The faster the country’s GDP grows, the faster the standard of living of its inhabitants raises. The economic stronger growth, in turn, means higher demand for the currency, i.e., for the Canadian dollar.
How will CAD react?
As a significant oil exporter, Canada tends to benefit from higher energy prices. Another positive factor is the ease of Covid. The Bank of Canada claims that the first-quarter growth seems to be more solid than expected. However, the war in Ukraine will likely lead to higher inflation and slower growth for the global economy this year, and Canada may be affected in particular. So far, the CAD hasn’t benefited much from the surge in oil prices. The energy sector’s role in Canada’s GDP may also decline, while industries such as aerospace, motor vehicles, and machinery suffer from the increased costs.
According to the March 1 release, the GDP remains unchanged. In other words, the Canadian economy stagnated. Even though analysts predicted such an outcome, the CAD reacted negatively. For example, USDCAD increased 0.72%.
How to trade on the Canadian GDP release?
A higher-than-expected reading will be bullish for the CAD, while an opposite reading is bearish for the currency.
- If actual numbers beat expectations, then the CAD will rise.
- Otherwise, it will fall.
Check the Economic Calendar.
Instruments to trade: USDCAD, EURCAD, CADJPY.
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