Dollar Softens as Canada’s GDP Surprises; Wall Street Extends 5-Day Winning Streak, Yields Tick Higher
A thin Black Friday session ended with the dollar on the back foot against most majors and US equities rising for a fifth straight day, while a blowout Canada GDP print jolted the loonie and stirred rate-path debates into next week.
Market Snapshot
- US indices closed higher for a fifth session; Nasdaq still finishes November in the red.
- USD broadly weaker, except firmer versus GBP; USD/CAD whipsaws after Canada’s GDP beat.
- German CPI slows to 2.3% y/y (prelim), undershooting forecasts and supporting eurozone disinflation trend.
- US Treasury yields inch up across the curve amid lighter holiday liquidity.
Key Points
- Canada Q3 GDP annualized 2.6% vs 0.5% expected; q/q +0.6% (prior revised to -0.5%).
- USD mostly lower into the weekend: softer vs EUR, JPY, CHF, CAD, AUD, NZD; modestly higher vs GBP.
- US stocks: Dow +0.61% to 47,716.42; S&P 500 +0.54% to 6,849.09; Nasdaq +0.65% to 23,365.69.
- US yields: 2y 3.497% (+1.6 bps), 5y 3.601% (+2.0 bps), 10y 4.019% (+2.1 bps), 30y 4.665% (+2.2 bps).
- Germany CPI (prelim) 2.3% y/y vs 2.4% expected; European bourses mostly higher on the week.
FX: Dollar Slips, CAD Steals the Show
With US traders heading out early for the weekend, the dollar drifted broadly lower, save for a slight gain against the pound. Snapshot changes versus the USD showed: EUR -0.04%, GBP +0.05%, JPY -0.10%, CHF -0.19%, CAD -0.36%, AUD -0.21%, NZD -0.10% (negative values implying a weaker USD vs those currencies).
USD/CAD was the outsized mover after Canada’s GDP shocked to the upside at 2.6% annualized versus 0.5% expected. The pair initially sank toward a 50% retracement of the September-to-date range near 1.3937 before bouncing into the New York close around a key resistance band at 1.3968–1.3976.
Canada’s Growth Surprise Complicates BoC Timing
Statistics Canada noted the quarter’s gain was driven by a stronger trade balance—with imports dropping as exports edged higher—while government capital outlays lifted investment as business capex stayed flat. Consumption was soft and inventory build slowed, tempering the headline strength.
For the Bank of Canada, the outturn outpaces its own 0.5% projection, buying time to assess whether disinflation resumes without further hikes. Markets will parse whether the trade-led boost is durable or a one-off driven by import compression, especially as household demand cools.
European Data and Risk Mood
Germany’s preliminary CPI slipped to 2.3% y/y in November, undercutting the 2.4% consensus and reinforcing the broader eurozone disinflation narrative. European equities ended mostly higher on the day, and posted solid weekly gains amid expectations of easier financial conditions in 2025.
Geopolitics remained on the radar after Ukraine’s President Volodymyr Zelenskyy signaled talks with the US “in the near future,” though the headline impact on markets was limited in thin holiday trade.
US Equities and Rates
Wall Street extended its winning streak to five sessions. Even so, the Nasdaq is set to close the month lower for the first time since March (-1.51%), while the S&P 500 eked out a 0.13% gain and the Dow added 0.32% in November. On the day, the Dow rose 0.61% to 47,716.42, the S&P 500 gained 0.54% to 6,849.09, and the Nasdaq added 0.65% to 23,365.69.
US Treasuries cheapened modestly, with yields up 1.6–2.2 bps across the curve. The move came in subdued volumes, typical for a Black Friday session, keeping FX volatility contained and risk appetite steady into the weekend.
Technical Levels to Watch
USD/CAD
- Support: 1.3935–1.3940 (50% of the September range)
- Resistance: 1.3968–1.3976 (near-term swing zone)
EUR/USD
- Support: 1.0860/80
- Resistance: 1.0960/80
USD/JPY
- Support: 153.20/40
- Resistance: 154.80/155.00
GBP/USD
- Support: 1.2650/70
- Resistance: 1.2770/90
What’s Next
Liquidity normalizes next week with a fuller calendar. Traders will gauge whether disinflation momentum in Europe and mixed US growth signals keep curves supported and the dollar capped, or whether any upside surprises in US data restore rate-cut skepticism and reinvigorate USD dips.
FAQ
Why did the Canadian dollar move so sharply?
Canada’s Q3 GDP surged 2.6% annualized versus 0.5% expected, prompting a swift repricing in USD/CAD. Even though the growth was driven by a narrower trade deficit as imports fell, the surprise gave the Bank of Canada latitude to keep policy steady while it evaluates inflation progress.
Is the US dollar weakening trend durable?
The USD softened in thin holiday trade and on benign inflation trends abroad. Sustainability hinges on upcoming US data and whether Treasury yields resume rising. A firm US growth pulse or sticky services inflation could re-strengthen the dollar.
How did European inflation impact the euro?
Germany’s CPI undershoot to 2.3% y/y reinforces eurozone disinflation, anchoring ECB cut expectations into 2025. The euro’s reaction was modest, reflecting that markets had already been leaning toward softer inflation prints.
What do rising US yields mean for risk assets?
A mild uptick in yields amid thin liquidity had limited impact. If yields climb further on strong US data, equities and higher-beta FX could face headwinds; conversely, stable or lower yields tend to underpin risk appetite.
Which technical levels matter most for USD/CAD now?
Watch 1.3935–1.3940 as near-term support (50% retracement of the September range) and 1.3968–1.3976 as immediate resistance. A break on either side could dictate next week’s bias.
Did US stocks finish November higher?
The S&P 500 and Dow posted small monthly gains, while the Nasdaq fell 1.51%, marking its first monthly decline since March. On the day, all three indices advanced, extending a five-session winning streak.
Reporting by BPayNews.
