07:47 AM EST, 01/31/2025 (MT Newswires) -- Canada will release November and preliminary December gross domestic product at 8:30 a.m. on Friday, noted Bank of Montreal (BMO).

Following some signs that momentum could be building in the Fall, the economy likely stumbled in November with GDP expected to contract 0.1% month over month, in line with the flash estimate, said the bank. Retail and wholesale activity fell in the month, while manufacturing was flat.

Also on the downside, Statistics Canada reported that mining/oil/natural gas slipped according to the flash estimate. Housing was one positive with sales rising for a fourth consecutive month, pointed out BMO. Hours worked dipped in November, but the Canada Post strike weighed.

The December flash estimate has some uncertainty, as home and auto sales went in reverse after a strong run in the prior few months, stated the bank. However, the GST/HST holiday provided a huge boost to retail activity according to the flash estimate, which will feed through to GDP.

BMO is expecting a modest positive for the December flash estimate (+0.1%-to-+0.2%), but it wouldn't rule out something on either side of that range given the data in hand. For Q4's early estimate, GDP growth continues to track in the 1.5%-to-2% annualized range, which is where the flash estimate is expected to land, in line with the Bank of Canada's Monetary Policy Report projection of 1.8%.

Investors could also get the federal government's budget balance for November on Friday, added the bank.

The United States Treasury yield curve is a touch steeper, with 10-years up 1 bp to 4.53%. President Donald Trump reiterated that Canada and Mexico are going to face 25% tariffs as of Saturday, though the exact structure -- in other words, exemption -- wasn't clear.

The Canadian dollar (CAD or loonie) and Mexico's peso (MNX) were hammered on the headlines, but are off their worst levels as there remains plenty of uncertainty, according to BMO. USDCAD spiked to C$1.4595 (or 68.5 U.S. cents) and is trading just below C$1.45 early Friday.

It appears that not everyone in the Trump administration is overly keen on tariffing the country's two largest trading partners, but that doesn't mean it won't happen. While tariffs would be a clear negative for the Canadian and Mexican economies, there would be some damage to the U.S. as well, pointed out the bank.