CAD Outlook: Q4 GDP in Focus Amid Tariff Uncertainty
Article published on February 27th, 2025 6:30AM UK Time
Canada’s Q4 GDP Data to Provide Key Economic Insight
The December and Q4 GDP figures, set for release on Friday, will be closely watched by markets and the Bank of Canada (BoC) as policymakers assess the strength of the economy. Current consensus estimates peg Q4 annualized growth at 1.9%, slightly above the BoC’s forecast of 1.8%.
Despite a strong domestic demand backdrop, the economy remains uneven. The BoC has highlighted that while consumer spending and residential investment have been robust, business investment continues to lag, and government spending is expected to slow in Q4.
The BoC’s latest Monetary Policy Report (MPR) noted a sharp increase in exports, estimated to have risen 4.6% in Q4, largely due to a surge in gold and pharmaceutical shipments—though these are typically volatile sectors. Imports climbed 2.9%, rebounding in motor vehicles but weighed down by weak machinery and equipment purchases, reflecting subdued business investment.
The BoC remain cautious, particularly regarding policy risks from the U.S., including potential new tariffs under President Trump. The central bank has warned that uncertainty around trade policy is dampening both consumer and business confidence, as well as investment intentions.
CAD Holding Near 1.42 as Tariff Uncertainty Lingers
The Canadian dollar (CAD) has generally struggled to capitalize on USD weakness, trading little changed around 1.42, while other major currencies have gained ground against the greenback.Headline CPI came in as expected, but core inflation remains sticky, which could complicate the BoC’s policy outlook.
Market pricing for a March rate cut has a 36% chance of a rate cut and 64% chance of a hold/
💡 Bottom Line: The CAD remains largely range-bound, with Q4 GDP and upcoming trade headlines as the key catalysts.