Canadian Dollar Strengthens on Better-Than-Expected May GDP

The Canadian dollar is strengthening against a myriad of most traded currency rivals to close out the trading week. The loonie is finding support on better-than-expected economic data, as well as a modest boost in crude oil prices. The Canadian dollar has rallied over the last three months, so does the currency still have legs to rebound over the next few months?

According to Statistics Canada, the national economy expanded 4.5% in May, up from an 11.7% contraction in April. The monthly GDP reading also beat the market forecast of 3.5%. Overall, this was the strongest monthly growth in economic activity since the statistics agency began the series.

In addition to industries specializing in goods and services, nearly all subsectors increased, led by recreational retail (98.2%), apparel (94.8%), and motor vehicle and parts dealers (68.6%). Moreover, construction activity surged 17.5%, retail trade jumped 16.4%, manufacturing jumped 7.4%, and wholesale activity rebounded 6%.

Researchers also released a preliminary estimate of real GDP in June, forecasting a 5% expansion.

In other economic data, the producer price index (PPI) rose 0.4% in June, down from 1.2% in May. Raw materials prices popped 7.5% last month, down from the 16.4% spike in April. Building permits rose 6.2% in June, down from 21.6% in May. On Thursday, it was reported that average weekly earnings climbed 10.4% in May year-over-year.

Next week, manufacturing, trade, and employment data will be released.

Energy prices are modestly rising to finish the trading week. September West Texas Intermediate (WTI) crude oil futures picked up $0.31, or 0.78%, to $40.20 per barrel on the New York Mercantile Exchange. September natural gas futures dropped $0.028, or 1.42%, to $1.803 a barrel.

Since oil and gas remain Canada’s top export, any significant change in prices – high or low can have an impact on the overall economy.

In the bond market, the benchmark 10-year government yield rose two basis points to 0.468%. The 30-year bond added one basis point to 0.926%.

The USD/CAD currency pair tumbled 0.22% to 1.3394, from an opening of 1.3423, at 18:41 GMT on Friday. The EUR/CAD slumped 0.74% to 1.5782, from an opening of 1.5904.

https://fxdailyreport.com/cana...