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Forex: Positive GDP Report Pushes Loonie Higher

By DailyFX Research Team
29 July 2005 19:55 GMT
Canadian GDP grew a higher than expected 0.3 percent in May, but figures for April were revised down to 0.3 percent. An increase in energy production and a pickup in domestic spending ahead of a potential rate hike pushed economic expansion. Such a report only supports the notion that the Bank of Canada will raise short-term interest rates at their next meeting. As a result, many investors remain bullish on the Canadian dollar. Next week, there will be no significant economic data until Friday when government officials release employment change and jobless rate numbers. At this point, strong growth in May likely quelled any doubts on whether BoC Governor David Dodge would continue as planned with monetary tightening.

Canadian equities fell on the day as speculators took profits ahead of a long holiday weekend. The TSX S&P index was off 0.9 percent to 10,424.49 near close. Five of the TSX’s ten main groups were lower, led by a 0.5 percent fall in the heavily weighted financial group and a 0.9 percent drop in technology issues. Sun Life Financial Inc lost 1.3 percent to C$44.22 despite reporting that profits rose 8.9 percent in the second quarter. Subject of merger rumors, Bank of Montreal, fell 1.4 percent to C$61.11 by day’s end. Monday is a national holiday in Canada and most major financial markets will be closed.

Canadian 10 year bonds remained relatively unchanged on the day as premiums lost 0.017 points to 108.450, but yields stayed the same at 3.86 percent.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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29 July 2005 19:55 GMT