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Loonie Tumbles as Canadian Economy Shrinks in February

Loonie Tumbles as Canadian Economy Shrinks in February

Tzu-Wen Chen, Technical Strategist

THE TAKEAWAY: [Canadian GDP unexpectedly shrank in February] > [Decreases led by temporary mining shutdowns] > [CAD tumbles vs. USD]

Canadian economic growth unexpectedly slowed in February as temporary shutdowns in mining and other good-producing industries impacted on production. Canada’s GDP slowed to an annualized rate of 1.6 percent in February, compared to January’s print of 1.7 percent.

Monthly GDP growth also disappointed, with Canada’s GDP contracting by 0.2 percent in February, reversing the growth seen in the previous two months. The Canadian economy had grown by 0.1 percent in January and 0.5 percent in December after shrinking by 0.1 percent in November. Economists surveyed by Bloomberg News had expected Canada’s Gross Domestic Product (GDP) to expand by 2.1%. The month-on-month print also fell short of expectations, with the consensus forecast of economists calling for growth of 0.2 percent.

According to a report released by Statistics Canada, the slowdown in economic growth was led by decreases in mining and oil and gas extraction, manufacturing and utilities, which outpaced advances in construction and wholesale trade. As mining closures are expected to be temporary, we could see Canada’s GDP pick up in the next month as impact from the shutdowns subside.

USDCAD 1-minute Chart: April 30, 2012

Loonie_Tumbles_as_Canadian_Economy_Shrinks_in_February_body_Picture_1.png, Loonie Tumbles as Canadian Economy Shrinks in February

Chart created using Strategy Trader – Prepared by Tzu-Wen Chen

The loonie tumbled against the greenback in the minutes following the release of the disappointing GDP print, falling as much as 37 pips against the U.S. dollar. At the time of this report, the USDCAD pair was trading at around C$0.9856.

--- Written by Tzu-Wen Chen DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.