The Canadian GDP report is due out Friday which will provide measurements of growth for the month of March and the first quarter of 2008. Expectations are that the economy was flat for March and slowed in the first quarter to 0.4% from 0.8% the quarter prior.
[B]What Are The Markets Facing? [/B]
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[B]Bonds – 10-Year Canadian Government Bond Futures[/B]
Canadian government bonds have broken below support of the 50.0% Fibo of 113.90 – 120.75. Momentum is looking like it will turn neutral or bearish at these levels as it may try and retest the 4/28 low of 116.89. A rebound in growth will generate risk appetite and push the BoC further away from future rate cuts which would weigh the contract further. Conversely a consecutive negative month of growth will provide support and reestablish the 117.325 Fibo level as support.
[B]FX – USD/CAD[/B]
As the Canadian economy has continues to show evidence of being able to withstand the headwinds from the U.S. loonie bulls have continued to sell the pair. A better than expected GDP reading will significantly increase the chances that the BoC will pause their current easing policy, and may send the pair below support. Especially if manufacturing growth continues, as that was Governor Carney’s concern after the last release. Although an inline print or a consecutive decline may see the pair bounce off of support. The USDCAD has failed to break below support at 0.9810 after rallying on the back of record oil prices. Indeed, according to Technical Strategist Jamie Saettele’s Daily Technical Report on Thursday, If the pair remains above 0.9710, we may see a USDCAD bullish push up to 1.0324.
Visit our recently updated Canadian Dollar Currency Room for specific resources geared towards the Loonie.
[B]Equities – S&P/TSX Composite Index [/B]
The S&P/TSX Composite Index has been in a steady decline since running into the psychological resistance level of 15,000. The recent downturn ended a 2,500 point rally on the back of rising oil prices. Trendline support is looking to slow reverse the current sell off which was led by the concerns that rising inflation will start to curb consumer spending. A rebound in the upcoming GDP report especially in the retail and wholesale trade components will go a long to easing those fears and could bolster investors putting equities back on trend. However, a consecutive month of declining growth will only stoke those fears and may send stocks tumbling below support.
