Canadian Dollar Soars, 17-Year High GDP Boosts BoC Rate Hike Bets
- The Canadian Dollar surged against its major peers after May’s GDP report
- Canada’s economy grew at an impressive 4.6% year-over-year pace, fastest in 17-year high
- Local 2-year bond yields climbed suggesting increased BoC rate hike bets
What do retail traders’ buy/sell decisions hint about the Canadian Dollar trend?Find out here.
The Canadian Dollar enjoyed quite a boost on Friday as the country released its May gross domestic product report. Year-over-year, GDP grew an impressive 4.6 percent following the 3.3 percent clip measured in April, beating estimates of a 4.2 percent expansion. This marked the fastest pace of growth for the Canadian economy since 2000 – subsequently a 17-year high.
Meanwhile, the monthly GDP pace came in at 0.6% versus 0.2% expected and 0.2% prior. This figure itself was the fastest pace of growth since January as well as the seventh consecutive month of economic expansion. You don’t have to look far to see what the markets were thinking following the release of these strong GDP statistics.
Local 2-year government bond yields rallied as the data crossed the wires suggesting a swell in speculation surrounding the Bank of Canada next policy moves. In its most recent monetary policy announcement, the BoC raised rates for the first time in seven years and suggested they might do so again depending on how economic data unfolds. Overnight index swaps now see a 75% probability of the next benchmark increase by October this year.
It is also important to mention, in terms of the Loonie’s reaction to the US Dollar specifically, that the second quarter US GDP was released simultaneously. The readings were mixed and they ultimately ended up sending the US Dollar lower, further amplifying USD/CAD’s decline.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.