Canadian Dollar Drifting, ISM Manufacturing PMI Next

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MarketPulse

Canada’s GDP surprises to the upside
US PCE Worth Index eases in June
ISM Manufacturing PMI anticipated to contract

The Canadian greenback is buying and selling at 1.3259, up 0.07%. Canadian markets are closed for a vacation and I anticipate motion to be restricted. On the financial entrance, the US releases ISM Manufacturing PMI. The index is projected to tick decrease to 46.9 in June, down from 47.0 in Could.

Canada’s GDP climbs in Could

Canada wrapped up the week with a robust GDP report. The economic system is estimated to have gained 0.4% in Could, after flatlining in April. The Canadian economic system continues to shock with its resilience regardless of rising rates of interest.

The Financial institution of Canada raised charges to 4.75% earlier this month after a five-month pause, arguing that financial coverage was not restrictive sufficient. The BoC assertion pointed at sturdy shopper spending and higher-than-expected progress as elements within the choice to lift charges. The BoC additionally expressed considerations that inflation may stay entrenched above the two% goal.

The sturdy GDP report has added gas to hypothesis that the BoC will elevate charges once more on July twelfth however there’s additionally concern that greater charges will result in a recession. Canadian 10-year bonds have fallen additional beneath the 2-year bonds, because the yield curve inversion, a predictor of recession, has grow to be much more pronounced.

Inflation has been falling and headline inflation eased to three.4% in Could, down from 4.4% in April. Core inflation additionally declined to three.8%, down from 4.2%. The query stays whether or not inflation, nonetheless properly above the two% goal, is falling quick sufficient to stop one other charge hike in July.

Within the US, there have been extra indicators that inflation is weakening. On Friday, the PCE Worth Index, which is the Fed’s favorite inflation gauge, declined from 0.4% to 0.1% in June. As properly, UoM Inflation Expectations dropped to three.3% in June, down from 4.2% in Could and the bottom since March 2021. Regardless of these indicators that inflation is decelerating, the Fed is extensively anticipated to lift charges on the July assembly.