Summary:

• Canadian Q1 GDP Q/Q: 1.3% vs 1.8% exp
• Reports that the US is set to impose tariffs on Canadian steel
• CAD pares Wednesday’s gains 

 There’s been a pretty sizable pullback in the Canadian dollar this afternoon after the latest GDP figures missed forecasts while reports that the US is set to impose tariffs on Canadian steel imports have also weighed on the Loonie. The first quarter GDP print from Canada in annualised terms came in at a disappointing 1.3% vs 1.8% expected.

 The latest GDP figures are close to the worst in almost 2 years with growth slowing to 1.3%. Source: Bloomberg

Looking at the break down and individual components a deceleration in household spending, lower exports of non-energy products and a decline in household investment appear to be the chief culprits behind the slowdown. The M/M reading came in better than expected at 0.3% vs 0.2% expected, but this was largely thanks to gains in mining, quarrying and the oil and gas extraction sector. 

 Household consumption to GDP has been in a clear downtrend for quite some time now and raises concerns as tot he strength of the underlying economy. Source: Bloomberg

Another source of potential weakness for the Canadian dollar are unconfirmed reports that the US is set to impose steel and aluminium tariffs on Canada, Mexico and the EU this afternoon. Taken together these event have seen USDCAD retrace more than half the declines seen since the BOC decision yesterday. The market is set to post 6 consecutive green candles – a clear sign that the bulls are in control in recent hours. 

 USDCAD has made a fairly strong move higher in the past few hours, helped by the latest GDP release and also talk of tariffs on Canadian steel. Price has recouped more than 50% of the declines since the BOC. Source: xStation