Canadian Dollar (CAD) Exchange Rate Falters after Lacklustre Domestic GDP
Significant Canadian data has been lacking this week, but Friday saw the publication of domestic growth figures and the Canadian Dollar exchange rate experienced its most notable movement of the past five days as a result.
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Yesterday’s US growth report for the first quarter delivered a negative surprise, and today’s Canadian figure followed suit.
The unseasonably harsh winter saw Canada post annualised first quarter growth of 1.2 per cent, less than the expansion of 1.8 per cent expected.
The growth figure for the fourth quarter of last year was also negatively revised to 2.7 per cent.
Canada’s economy posted growth of 0.1 per cent in March month-on-month, in line with expectations.
The annual 2.1 per cent increase in GDP recorded for March was less than the 2.3 per cent expected.
Meanwhile, Canada’s industrial product price declined by 0.2 per cent in April and the raw materials price index advanced by just 0.1 per cent.
Respective gains of 0.3 and 0.5 per cent had been anticipated.
The slump in growth was broad-based and reflected declines in housing construction, business investment and exports.
After the Canadian data was published the ‘Loonie’ edged lower against the US Dollar and British Pound.
In the view of Toronto-based industry expert Darcy Browne; ‘The GDP just disappointed in Canada. There could be another camp that looks at this and says, the US printed minus 1 per cent and we printed significantly better than that, so maybe this isn’t a sell-Canada environment. But markets are traditionally built around expectations, and expectation wasn’t met on this number’.
The GBP/CAD exchange rate strengthened by 0.27 per cent before the close of local trading.
Over in the US, personal consumption expenditure and personal income reports were in line with expectations.
Next week the Bank of Canada will issue its interest rate decision.
The central bank is expected to leave interest rates unchanged.
Movement in the commodity-driven currency is also likely to occur as the result of the RBC Canadian manufacturing PMI, China’s services and composite PMI, Canada’s building permits figures and Ivey Purchasing Managers Index and domestic employment data.
Of course the highly influential US non-farm payroll report (due out on Friday) could also affect the currency market, and investors will be taking a keen interest in the European Central Bank, Bank of England and Reserve Bank of Australia interest rate decisions.
Any surprising developments could take a toll on higher-risk currencies like the Canadian Dollar.
The Canadian Dollar is trading against the Pound in the region of 0.5511 and against the US Dollar in the region of 0.9211