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Loonie Tumbles to a 3-Year Low on a Surprise PMI Decline

Loonie Tumbles to a 3-Year Low on a Surprise PMI Decline

Benjamin Spier, Technical Strategist

Talking Points:

  • Canadian Ivey PMI unexpectedly declined to a 4-year low
  • The employment index also declined in December
  • USD/CAD rose to a 3-year high

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The Canadian Dollar fell to a new 3-year low against the US Dollar, as the Ivey Purchasing Managers Index unexpectedly fell to a four year low in December.

The Canadian index of economic activity was reported at 46.3, disappointing expectations for 54.5 and down from 53.7 in November. The employment index fell to 53.4 in December from 60.3 in November. The December Ivey PMI fell below the 50.0 neutral level for the first time in 5 months.

The Bank of Canada recently predicted 2.3% annualized growth in Q4, following a reported 2.7% annualized growth in Q3 and 1.7% expansion in Q2. The BoC stopped mentioning the possibility of a rate increase in its October meeting because of below target inflation and slower than expected growth. Therefore, below target economic indicators like today’s PMI release may further weigh on monetary policy and therefore drive the Canadian Dollar lower.

That’s why the Loonie fell about 45 pips against the US Dollar following the release, first on CAD weakness, but the decline was soon joined by general greenback strength seen across all Forex markets. USD/CAD may next find resistance by the 4-year high at 1.0854.

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USD/CAD 1-Minute: January 7, 2014

Loonie_Tumbles_to_a_3-Year_Low_on_a_Surprise_PMI_Decline_body_Picture_1.png, Loonie Tumbles to a 3-Year Low on a Surprise PMI Decline

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to instructor@dailyfx.com .

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

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