USD/CAD Slides after Canadian GDP Tops Expectations
- July GDP at +0.5% m/m, +1.3% y/y, vs +0.3% m/m, +1.0% y/y expected
- USD/CAD dips after Canada’s GDP tops expectations and U.S Personal Spending Data disappoints
- See the DailyFX Economic Calendar for Friday, September 30, 2016.
Growth figures released earlier today revealed that the Canadian economic recovery may be on a stronger course than previously anticipated after a sharp output contraction in Q2’16, caused in part by slumping oil production exacerbated by the devestating Alberta wildfires.
Statistics Canada reported that July GDP expanded moderately +0.5% m/m and +1.3% y/y, both slightly above market consensus. Analysts surveyed by Bloomberg news had anticipated to see a +0.3% m/m and +1.0% y/y expansion, respectively. Going into the data release, expectations have been largely tempered as disappointing July Retail Sales, Manufacturing Shipments and CPIhad signaled weak economic growth.
The July growth report showed that goods producing industries expanded +1.0% boosted by a +3.9% increase in mining, quarrying, and oil and gas extraction. Meanwhile, service producing industries grew +0.3% and was lifted by a +1.1% rise in transportation and a +0.9% increase in finance and insurace.
Despite the better-than-expected GDP report, it is unlikely the data will convince skeptics that faster than expected output growth will be sustained going forward. Policymakers have recently underscore deepening concerns over weakness in the economy and have suggested that monetary policy will likely remain accomodative for longer than predicted amid looming headwinds.
Here’s a summary of the data that’s impacting the Canadian Dollar this morning:
- CAD Gross Domestic Product (JUL): +0.5% versus +0.3% expected, from +0.6% (m/m).
- CAD Gross Domestic Product (JUL): +1.3% versus +1.0% expected, from +1.2% (y/y).
Chart 1: USD/CAD 1-minute Chart (Intraday) (September 30, 2016)
Immediately after the Canadian GDP report USD/CAD took a nosedive with the pair falling to C$1.3111 in a knee-jerk reaction. At the time this report was written, however, USD/CAD had settled around C$1.31145. It is important to point out that CAD gains are also being supported by soft U.S. economic data with Personal Spending flat in August and the Fed PCE Deflator at 0.1%.
Read more: Looking Ahead to Q4, Volatility for EUR, USD, GBP Seems Certain
--- Written by Christopher Vecchio, Currency Strategist and Diego Colman, DailyFX Research
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