"Canada's economic performance over the final quarter of last year was probably the best in more than two years"
- David Madani, Canada economist at Capital Economics
Market sentiment (55% bullish) suggests the USD/CAD currency pair will continue challenging this year's high at 1.1225, even though for the time being the pair struggles to go higher, trading at 1.1110. Retail sales and other fundamental data from the U.S., however were very weak during the last couple of weeks. This week the pair is more likely to head to the south, retreating from 1.12 mark again, as Canada GDP is expected to show strong growth over the fourth quarter. Therefore, it will be interesting to monitor whether the pair breaches the topside or the area of 1.1200-1.1225 will form a top.
Earlier this year Canada Finance Minister Jim Flaherty pledged the country will post stronger-than-expected growth this year on the back of strong optimism surrounding the U.S. recovery. Flaherty sees a potential for a 2%-3% growth this year, compared with the median forecast expressed by analysts that stands for 2.3% expansion. The land of the maple leaf has posted consistently sluggish figures in the past year, with the growth averaging just 1.9%. This Friday Statistics Canada is projected to show a 2.9% growth for the final quarter.
While this year's outlook is promising, the country is still highly dependent on the investment. Moreover, weak December retail sales due to bad weather conditions could become a massive drag on the economy.
© Dukascopy Bank SA