CAD Strengthens As Canadian GDP Growth Beats Forecasts in June
THE TAKEAWAY: [Canadian economic growth expands more than forecast in June] > [Provides some support for interest rate increase] > [CAD strengthens]
The Canadian economy stagnated in the second quarter, as softer growth in exports offset a pickup in business investment and increase in inventories. Second quarter Gross Domestic Product (GDP) grew at an annualized rate of 1.8 percent, the same pace of growth as the previous quarter. The consensus forecast of 25 economists surveyed by Bloomberg News had called for quarterly expansion at 1.6 percent.
Ottawa-based Statistics Canada reported that economic growth accelerated slightly, growing 0.2 percent in June from a month ago after expanding 0.1 percent in May. On a yearly basis, the economy grew 2.4 percent in June. Economists had expected Canada’s GDP to grow 0.1 percent from a month earlier, and 2.2 percent from a year ago.
Last week, Bank of Canada Governor Mark Carney reiterated that an interest rate hike “may become appropriate” as the economy moves towards full output. The better-than-expected growth data could provide support for some tightening of monetary policy ahead of the Bank’s rate decision meeting next week.
USDCAD 1-minute Chart: August 31, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
In the minutes following the release of the Canadian GDP report, the Canadian dollar strengthened against the U.S. dollar on the back of stronger-than-expected data. At the time of this report, the loonie continued to trade higher, with the USDCAD pair trading at C$0.9868.
--- Written by Tzu-Wen Chen, DailyFX Research
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.