This morning’s headline print missed by a wide mark, in fact, not many analysts were in the same ball park. For the month of February, GDP dropped an unhealthy -0.2% after a +0.1% advance in January. This morning’s release leaves the Canadian economy tracking well below Governor Carney’s, at the BoC, quarter release of +2.5%. Growth for the Q1 will likely come in at +2% or less, even if there is a rebound in March. This would imply that the output gap will not narrow this quarter. This will be viewed as a potential u-turn in renewed interest rate hikes that came about after the market got itself all bulled up after the hawkish comments from Carney last week. The Canadian economy has a long ways to go to adhere to the BoC recent forecasts.
Today’s disapproving release can only be bullish for fixed income and negative for the Loonie outright. A currency that has been optioned protected at 0.9800, now has the potential to test the strength of option sellers at the other figure, 0.9900, and at the stronger resistance of 0.9925/40.