Canadian Dollar Outlook: USD/CAD Price Seeks Breakout Ahead of Canadian GDP

The Canadian dollar has recently been at the mercy of USD dictatorship as the markets continue its hawkish repricing of interest rate guidance for the Federal Reserve. Peak rates for 2023 have now pushed up above 5.4%, while money markets forecast no change in the Bank of Canada (BoC)‘s upcoming rate decision.

This central bank divergence could weigh negatively on the loonie; however, Fed tightening is very much baked into current pricing. Only additional positive US economic data could spur the greenback even further. Fed officials continue adding to the aggressive monetary policy narrative, but this has been the case for some weeks now, and markets seem to be reacting less to their guidance.

After today, Canadian GDP is expected to come in lower, with the QoQ figure anticipated to be negative. This could heighten recessionary fears in Canada as the first quarter of contractionary growth since Q2 2021. From a US perspective, consumer confidence for February is estimated to come in higher than January. If both data sets are released as expected, the CAD could lose further ground to the USD.

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