CAD under pressure after GDP miss; USD shrugs off soft PMI

Summary:

• Loonie swoons after soft GDP figures; USDCAD near weekly highs

• US manufacturing figures disappoint but USD mixed on the week

• DE30 moves up close to 4-month high

• BMW and Daimler team up on autonomous driving

The most recent GDP figures from Canada have painted a pretty bleak picture of growth and weighed on the Loonie. For December, in Y/Y terms GDP came in a +1.1% vs +1.4% exp, while on a M/M basis it was -0.1% vs 0.0%. An annualised Q/Q reading shows the bigger picture, and this is arguably where the biggest disappointment came, with a large fall to +0.4% from +2.0% prior. This was also well below the expected reading of +1.0%.  It had been a bit of a mixed week for USDCAD on the whole but the strong positive reaction to this data has seen price move firmly higher and is now probing the weekly highs around 1.3240.

The final data point of note for the week has flashed something of a warning sign on the US economy, with 2 manufacturing gauges both coming in below forecasts. The ISM manufacturing PMI, which is the more widely viewed of the two, fell to 54.2 for February, down from 56.6 previously. This also reflects negatively compared to the consensus forecast of 55.8. The three main components of this release also did little to support the US dollar as they all declined, with employment coming in at 52.3 (55.5 prior), new orders 55.5 (58.2 prior) and prices paid 49.4 (49.6 prior).  There’s been some decent moves in USD pairs this week, but on the whole the buck hasn’t really moved too much with a fairly even spread of currencies gaining and losing against the greenback.

Stocks made a bright start to the final session of the week with the German dax rallying to its highest level in almost 4 months above the 11600 this morning. These gains have pared a little this afternoon as the US open saw a pullback in equities across the Atlantic, but it’s still been a decent week on the whole and the markets remain near multi-month highs.  

Everything seems to hint that electric and autonomous vehicles will be the future of the automotive sector. Volkswagen (VOW.DE) and Ford Motor (F.US) formed an alliance some time ago aimed at getting ahead of competitors. However, it seems that Ford and is are not the only ones that think it is better to cooperate than compete. Two German carmakers, BMW (BMW.DE) and Daimler (DAI.DE), signed a memorandum of understanding yesterday to develop high-profile driverless technology. As both companies had similar views on the future of mobility such a move can result in cost savings as companies will not overlap in R&D expenses. All German carmakers experience decent gains today.