Last week we saw third-quarter US gross domestic product exceeding expectations, followed by non-farm payrolls that likewise topped forecasts, and that leaves the US economy looking well-positioned to press onwards and upwards in the final quarter of the year.
As the US is Canada’s largest trading partner by far, such a scenario would tend to be supportive for the Canadian dollar. By mid-afternoon in New York, the Canadian dollar had advanced against many of its major counterparts, with GBP/CAD down 0.23% at 1.6740 and CAD/JPY up 0.2%.
Growth for North America as a whole has been looking solid, based on the latest data, with Canadian GDP expanding 0.3% in August and housing data on Friday suggesting that momentum is picking up pace.
The Bank of Canada recently dropped its so-called tightening bias, removing wording from its last rate announcement that promised to hike rates at some point in the future. The BOC had maintained a vague tightening bias for some 18 months, introduced by previous governor Mark Carney in order to combat rising household debt, but this was abandoned by new governor Stephen Poloz, who is evidently more concerned over low inflation than elevated household imbalances.
But this dovish move seems to have been made just as the Canadian housing market is heating up. Canadian housing starts rose to 198,282 in October, from September’s upwardly-revised 195,929, significantly higher than the consensus estimate of 190,800.