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Canadian Economy Contracts, USDCAD Climbs to 1.23
Friday, 31 October 2008 12:43:34 GMT  |  David Song, Currency Analyst
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The Canadian economy contracted 0.3% in August as fading demands from the global economy push firms to cutback on production. A breakdown of the report showed that manufacturing activity declined 1.1% from the previous month, while wholesale activity fell to a five year low as the index slipped 3.1% in August. In addition, mounting growth pushed energy production down by 0.5%, followed by a 0.3% decline in construction. The data suggests that the conditions may only get worse as the U.S., Canada’s biggest trading partner, slips into a recession, and has certainly fueled expectations for another rate cut by the Bank of Canada as growth prospects deteriorate. Meanwhile, the Canadian dollar weakened following the release as the USDCAD moved higher to hold above 1.2300.

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