The Canadian dollar surged at the strongest pace in two weeks after the nation’s economy rose faster than forecasted in the fourth quarter. The gross domestic product rose 2.4 percent on an annual basis, exceeding analysts’ expectation of a 2 percent growth.
The loonie appreciated 0.7 percent to trade at C$1.2442 per U.S. dollar as of 10:16 a.m., Toronto time. It had earlier appreciated by 0.8 percent.
The report, which showed businesses accumulated stocks and consumers purchased more, comes ahead of the Bank of Canada’s meeting this Wednesday to discuss whether to boost monetary stimulus. Policy makers had reduced interest rates in January in order to offset the effect of weaker crude prices. Canada is one of the world’s major crude exporters.
“Once you start digging into the numbers the momentum looks relatively weak — going into the first quarter, the numbers are going to be on the weaker side,” Charles St-Arnaud, a senior economist at Nomura Securities International Inc in London, told Bloomberg News. “The BOC will probably say the same thing. One thing we have to keep in mind is we haven’t seen the negative shock of the lower oil price yet.”
Crude oil prices have declined by at least 50 percent since June. The Bank of Canada Governor Stephen Poloz, in reference to the January rate cut, said last week that the interest rate reduction provides a basis for gauging how the economy reacts to it. The central bank slashed its overnight rate to 0.75 percent, up from 1 percent, the first rate adjustment since September 2010.
The GDP report also showed that the economy grew by a revised 3.2 percent in the third quarter, up from 2.8 percent as earlier stated. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Jonathan Millet at email@example.com