The Canadian dollar is up slightly on Thursday. Currently, the pair is trading at 1.3435, up 0.25%. On the release front, there are no Canadian events. In the U.S., Final GDP for the fourth quarter is expected in at 2.4%. Unemployment claims is projected to tick lower to 221 thousand. On Friday, Canada releases GDP, while the U.S. will publish consumer spending and inflation data.
Canadian bonds showed an inverted yield curve on Monday, after U.S. treasury bonds showed the same pattern on Friday. This has spooked investors, as the inverted yield curve is a sign of a recession. The Bank of Canada is already in a dovish stance and could follow the Fed and freeze rates for the rest of the year. If the economic slowdown continues, policymakers may have to consider a rate cut in order to stimulate the economy.
Global trade tensions have weighed on inflation levels in the developed economies, and the U.S. is no exception. However, with the Fed saying it will put a hold on rates until 2020, could that change? At the Fed policy meeting, policymakers lowered their inflation forecast for 2020, citing weakness in the Chinese and European economies. However, the chief economist of Credit Suisse, James Sweeney, has taken a different tack, saying that U.S. inflation could climb as high as 2.3% next year, in response to the lack of rate hikes. Sweeney said that although inflation remains below the Fed target of 2.0%, there are signs in the services sector of inflation picking up.
