Canadian Dollar Resumes Rally Despite April Economic Growth Missed Forecast

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Canadian economy grew moderately in April since a contraction in good-producing industries largely offset an expansion in service-producing industries. The Gross Domestic Product report released by Statistics Canada today showed that the economic activity in Canada expanded 0.1 percent in April following a 0.1 percent advance in March and 0.2 percent rise in February. The reading missed the consensus forecast of 0.2 percent from the Bloomberg survey. From a year earlier, Canadian Gross Domestic Product edged up at the rate of 2.1 percent in April, same with the annualized rate in the previous month and below the median expectation of 2.3 percent of economists polled by the survey.

Canadian economic growth in April was mainly attributable to the expansion in service-producing industries. Of all sixteen sectors in the service-producing industries, thirteen sectors reported gains in outputs, led by advances in wholesale trade (1.3 percent), retail trade (0.8 percent), and real estate and rental and leasisng (0.4 percent). On the contrary, good-producing industries shrank 0.3 percent with the largest decline in utilities productions (1 percent). Moreover, agriculture and forestry, mining and oil and gas contraction and construction sectors all reported notable falls by 0.6 percent in their outputs that trimmed gains in Canada’s April total products.

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USD/CAD 1-minute Chart: June 30, 2014

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1-minute USD/CAD chart

Following the less-than-anticipated print, the loonie immediately lose its footing against their peers. As can be seen from the 1-minute USD/CAD chart above, the Canadian dollar was traded at its two-week high against the greenback before the release. The USD/CAD pair jumped approximately 20 pips from 1.0675 to 1.0695 within few minutes after the reading was came out. The Relative Strength Indicator was crossing over a 70-level, indicating that foreign exchange trading crowd was massively selling the loonie in favor of the U.S. dollar. Nonetheless, a temporary fall in the USD/CAD may be triggered by the profit-taking of traders on the Canadian dollar’ recent appreciation rather than by the unexpected Canadian GDP print. The loonie selloff was short-lived as the Canadian dollar resumed gains versus other major currencies after an hour. At the time this report was written, the USDCAD pair was traded at 1.0678, the same level with the rate before a Canadian GDP data.

To contact the reporter of this story; Trang Hien Nguyen at trangnguyen@forexminute.com