Canadian forex review: C$ down with soft Cdn GDP

By Commodity News Service Canada

WINNIPEG, July 31 – The Canadian dollar was down against the US dollar on Friday, reacting to soft Canadian gross domestic product (GDP) data, analysts said.

According to Statistics Canada, GDP fell 0.2 per cent in May, the fifth consecutive monthly decrease. Pre-report expectations called for a flat reading on the GDP in May.

If the June GDP report shows a six consecutive monthly decrease, that would mean Canada has entered a recession, officials say.

The Canadian dollar closed at US$0.7645 or US$1=C$1.3080 on Friday, which compares with Thursday’s North American settlement of US$0.7686 or US$1=C$1.3010.

Weakness in the crude oil market on Friday was also bearish, as it is one of Canada’s biggest exports. Crude oil prices fell more than three per cent.

Ongoing expectations that the US Federal Reserve will raise interest rates later this year were also overhanging the Canadian currency.

Though, sentiment that the Canadian currency is starting to look oversold helped to limit the downside.

Canadian bonds were stronger on Friday, as traders flocked to safe-haven assets after the disappointing Canadian GDP data was released, brokers said.

The two-year bond yielded 0.406% on Friday, from 0.454% on Thursday. The ten-year bond yield was at 1.433%, from 1.493%. Bond yields fall as their prices rise.