DailyFX: Currency Focus: Loonie Action Confined In Light Of Growth

Speculation earlier on led to incremental weakness in the USDCADcurrency pair as the major was contained in a roughly 50 piprange.  Lending to Canadian dollar bullishness, gross domesticproduct for the world’s eighth largest economy expanded more thanestimated for the quarter.  Expanding at a3.2 percent rate in theprevious period, third quarter growth rose 3.6 percent.  This nowtopples earlier government estimates of 2.4 percent and causeseconomists to anticipate further rate hikes to contain inflation. According to Canada’s broadest measure of price increases, prices rose1.9 percent in the quarter with energy spikes contributing to thefigure.  Meanwhile, overall inflation is steady at 2.6 percent,above the Bank of Canada’s benchmark median.  This now paves theway for definitive tightening policy as Governor David Dodge looks tocurb inflationary pressures earlier rather than later, effectivelynarrowing the interest rate differential between the U.S. and its majortrading partner.  Ultimately, this will weigh heavily on theunderlying currency pair as questions remain abound over the durationof the current U.S. tightening policy.  Subsequently, interestshould be light until Friday’s U.S. non-farm payrolls report isreleased.
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