Loonie Remains Strong despite Flat October Canada GDP
THE TAKEAWAY: Canadian Gross Domestic Product Fail to Expand in October > Declines in Good-producing Outputs Offset Gain Manufacturing >The Loonie Stronger
Canada’s gross domestic product fails to expand for the first time in five months in October, reflecting lower pace of recovery in the world’s tenth largest economy which has been vulnerable to spreading sovereign crisis in Europe and overheating domestic housing market.The report released by Statistics Canada today showed thateconomic activities in Canada stalled in October following a 0.2 percent advance in September, 04 percent gain in August and July. The reading missed consensus forecast as economists surveyed by Bloomberg News predicted an expansion of 0.1 percent. From a year earlier, Canadian gross domestic product edged up 2.7 percent in October compared to 3.0 percent in September.
Canada’s real gross domestic flatted in October as declines in goods-producing outputs offset gains in manufacturing. Production in utilities sector slumped 1.5 percent after rising 1.3 percent in the previous month due to lower demand for both electricity and natural gas. Meanwhile, lower outputs of non-metallic and mineral mines triggered 0.2 percent retreat in production in mining and quarrying sectors, the first decrease in five months. Also, construction unexpectedly fell 0.4 percent in October resulted from lower residential and non-residential building construction.
Outputs in service-producing sectors advanced 0.2 percent since increase in retail trade far more compensated for decrease in whole sale trade. Retail trade picked up for the third straight month, rising 0.6 percent, notably being recorded in motor vehicle and parts dealers, food and beverage stores, and health and personal care stores. In contrast, whole sales retreated 0.3 percent in the month as plunge in wholesale trades of household goods and petroleum products outweighed surge in food products, motor vehicles and building materials.
USDCAD 1-minute Chart: December 23, 2011
Charts created using Strategy Trader– Prepared by Trang Nguyen
Canadian currency strengthens for the third consecutive days today versus most of its major trading partner as oil prices continued to climb on improved U.S. economic data and more-than-estimated decline in U.S. oil stockpile at present. Crude oil price and loonie value are highly correlated because Canada is the largest oil exporter to the U.S. and is one of few developed nations that have net energy exports. Market participants remained bullish on the loonie despite of disappointing October gross domestic product result. As can be seen from the 1-minute USD/CAD chart above, the loonie immediately pare gains versus the greenback by 15 pips from 1.0180 to 1.0195 following the release. However, Canadian rapidly resumed its advance after forty five minutes. At the time this report was written, the Canadian dollar appreciates 0.05 percent against the dollar, trades at 0.9801 U.S. dollar in Toronto.
--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com
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