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Canada's GDP expanded by 0.1% in January 2024, slightly below December's 0.3% but exceeding forecasts of 0.0%. Goods-producing sectors like manufacturing and construction drove growth, while services industries remained stagnant. RBC economists highlight this as a mixed signal for the Bank of Canada (BoC), suggesting economic momentum remains fragile despite outperforming expectations. The BoC's cautious policy stance, including its 5.25% benchmark interest rate, is likely to persist as inflation remains above target and labor market data shows uneven recovery.
For forex traders, the data reinforces the BoC's potential to maintain higher-for-longer rates, which could support the Canadian dollar (CAD) against peers like the USD and EUR. However, the weak services sector and global demand for commodities may limit CAD's upside. Traders should monitor upcoming BoC minutes and February GDP data for policy clues. The CAD/USD pair is currently trading near 1.35, with key support at 1.34 and resistance at 1.36.
The report underscores the importance of sectoral economic data in central bank decision-making. For Gulf investors with exposure to Canadian equities or commodities, the mixed growth figures suggest maintaining a balanced portfolio. Watch for BoC's inflation forecasts in Q1 and potential rate cuts in Q2 if economic momentum weakens further.
