USD/CAD: Loonie has limited potential for a recovery – Commerzbank

Canadian Q3 GDP was up more than expected. Details were more downbeat however. Economists at Commerzbank maintain a CAD bearish stance.

Mixed data on growth in Q3

“At 2.9% the seasonally adjusted QoQ rise came in well above Bloomberg consensus expectations of 1.5% (both annualised). Looking at the details revealed a fly in the ointment, i.e. gross fixed asset investment and private household consumer spending had fallen.” 

“Everything all told the data signals a not unexpected slowing of economic momentum, which was also confirmed by monthly data. As expected, the economy was able to record a small mom rise in September. The statistical agency’s preliminary estimates for October signalled that it stagnates.”

“In view of the weakening economy the market seems to be lowering its rate hike expectations for the Bank of Canada’s December meeting. The market seems to have priced in a rather smaller rate step of 25 bps.”

“We stick to our projections, which see limited potential for a recovery in CAD against USD medium term.”