The Canadian dollar is up slightly on Thursday. Currently, the pair is trading at 1.3435, up 0.25%. On the release front, there are no Canadian events. The U.S. Bureau of Economic Analysis on Thursday reported that the real gross domestic product (GDP) increased at an annual rate of 2.2% in the third estimate of the fourth quarter to fall short of the analysts’ estimate of 2.4%. On a quarterly basis, the GDP growth came in at 1.9% vs 1.8% expected. On Friday, Canada releases GDP, while the U.S. will publish consumer spending and inflation data.

Canadian bonds showed an inverted yield curve on Monday after U.S. Treasury bonds showed the same pattern on Friday. This has spooked investors, as the inverted yield curve is a sign of a recession. The Bank of Canada is already in a dovish stance and could follow the Fed and freeze rates for the rest of the year. If the economic slowdown continues, policymakers may have to consider a rate cut in order to stimulate the economy.

The chief economist of Credit Suisse, James Sweeney, has taken a different tack, saying that U.S. inflation could climb as high as 2.3% next year, in response to the lack of rate hikes. Sweeney said that although inflation remains below the Fed target of 2.0%, there are signs in the services sector of inflation picking up.