The Canadian dollar has edged lower on Wednesday. In North American trade, USD/CAD is trading at 1.2743, down 0.27% on the day.
Canada’s Building Permits beats expectations
It has been a relatively quiet week for the Canadian dollar, despite some solid releases out of Canada. Building Permits for October increased 1.3% m/m, crushing the consensus of -1.0%. The indicator gained 4.3% in September. This follows a robust GDP for Q3 of 5.4% y/y, much better than the forecast of 3.0%. A major driver for the strong gain was consumer spending, as health restrictions were eased and consumers were able to go out and spend. The economy grew by 0.8% in October m/m and has almost completely recovered to its pre-pandemic level of February 2020.
Despite this week’s strong numbers, the Canadian dollar has shown limited movement. Investors remain concerned about the Omicron variant of Covid, which has spread rapidly and could cause another wave of Covid. Preliminary reports indicate that the symptoms from Omicron have been mild. This has led to hopes that global economic activity will not be greatly affected by the variant. Still, until more information is available about Omicron, risk appetite will be subdued and this will weigh on minor currencies like the Canadian dollar.
The markets were upended by the appearance of Omicron on the global stage last week, and then Jerome Powell came along with a surprise of his own. Powell made a hawkish turn in his testimony before a Senate committee, which surprised the markets. Powell retired the word “transitory” from his description of inflation, a label that the markets essentially discarded months ago. As for the burning issue of tapering, Powell stated that a speeding up of the unwinding of the taper scheme would be discussed at the December meeting. Powell’s abrupt move has led to more uncertainty in the markets, which means investors should be prepared for further volatility.
- There is support at 1.2681. Below, there is support at 1.2569
- The next resistance line is at 1.2852, followed by 1.2911