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CAD Weakens As Canadian May GDP Expanded Less Than Forecast

CAD Weakens As Canadian May GDP Expanded Less Than Forecast

Tzu-Wen Chen, Technical Strategist

THE TAKEAWAY: [Canadian economic growth improves but expansion slower than expected] > [Manufacturing decline offsets gains in retail and energy] > [CAD weakens]

Canada’s economy improved in May, albeit at a slower-than-expected pace of expansion, as a decline in manufacturing offset gains in retail trade and energy production. Canada’s real gross domestic product (GDP) grew 0.1 percent in May from a month earlier, after expanding 0.3 percent in April. The consensus forecast of economists surveyed by Bloomberg News had called for 0.2 percent growth in May. On a yearly basis, GDP grew 2.4 percent in May, falling short of expectations for an increase of 2.6 percent.

According to a report released by Statistics Canada, mining and oil and gas extraction rose 0.6 percent in May following a 2.0 percent surge in April. Energy producers led the increase in May following maintenance and production difficulties in February and March. Retail trade gained 0.7 percent, while manufacturing fell 0.5 percent and construction declined 0.2 percent.

USDCAD 1-minute Chart: July 31, 2012

CAD_Weakens_As_Canadian_May_GDP_Expanded_Less_Than_Forecast____body_Picture_1.png, CAD Weakens As Canadian May GDP Expanded Less Than Forecast

Chart created using Market Scope – Prepared by Tzu-Wen Chen

The loonie continued to weaken against the U.S. dollar in the minutes after the release of weaker-than-expected Canadian GDP data. At the time of this report, the loonie had slid further, with the USDCAD pair trading at C$1.0035.

--- Written by Tzu-Wen Chen, DailyFX Research

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