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Statistics Canada reported for August: the economy did not grow at all, and the preliminary estimate for September is already minus 0.1%. For the market, this is an argument in favor of a softer Bank of Canada policy and a reason to reassess the Canadian dollar.
The Canadian dollar is strengthening for the third session in a row: the USD/CAD pair headed toward 1.3968 on Friday and traded below 1.3960 - the lowest level in six weeks. Over three weeks, the pair has lost more than 2%.
On October 28 at 16:45 MSK, the Bank of Canada raised its key rate from 2.25% to 2.5% - exactly what the market expected. The main surprise was not the move itself, but the signal: the regulator allowed that another hike may be needed.
In September, Canada lost 68.3 thousand jobs, while employment growth was expected at 7 thousand. Unemployment rose to 6.5%, and USD/CAD climbed to 1.4276 amid a sharp drop in Canadian bond yields.
USD/CAD rose to 1.4293 on October 6, an 18-month high. The Canadian dollar is declining for the third session in a row amid weak oil, and the pair itself already looks technically overbought.
