Canadian Dollar Renews 2021 Rally Against US Peer?
The Canadian dollar could be renewing its 2021 rally against its US peer in the middle of the trading week, buoyed by better-than-expected economic data from earlier this year. The loonie also found additional support on rising crude oil prices and optimism for future economic prospects. Can the Canadian dollar break below 1.25 next month?
According to Statistics Canada, the gross domestic product (GDP) rose 0.7% in January, beating the median estimate of 0.5%. This is up from the 0.1% jump in December, and it represents the ninth straight monthly gain. The monthly GDP growth since May has continued to offset the two-month plunge in March and April.
The goods-producing industry expanded 1.5%, while the services-producing sector edged up 0.4%. Manufacturing output grew 1.9%, construction activity jumped 1.4%, and oil and gas extraction grew 2.7%. Retail trade contracted 1.7%.
In other economic data, producer prices surged in February, with the producer price index (PPI) rising 2.6%. Year-over-year, the PPI has ballooned 7.1%. Raw materials prices soared 6.6% last month, up from 5.3% in January.
On Tuesday, it was reported that average weekly earnings advanced 8.3% year-over-year in January.
Energy commodities rebounded midweek following a surprise build in weekly US inventories. May West Texas Intermediate (WTI) crude oil futures rose 0.36% to $60.77 a barrel, while May natural gas futures were relatively flat in the $2.61 to $2.62 per million British thermal units (btu) range.
Canada maintains a current account deficit, so the economy depends on exports for growth. Since oil and gas are the country’s biggest foreign shipments, any substantial price change can impact the loonie and the broader economy.
A new report from the Conference Board of Canada suggests that the national economy is on track for a substantial rebound in 2021 and 2022. According to the study, the gross domestic product (GDP) is forecast to grow 5.8% this year and 4% next year. But concerns over a red-hot housing market that could cool down would negatively affect the economic recovery, study authors warn.
Despite the devastating impacts of the pandemic, residential construction activity increased last year, and additional gains are anticipated in 2021 as well.
With consumer demand for tourism and recreational services having been suppressed for more than a year, we expect to see a strong rebound in spending on services once restrictions are lifted.
Although Canadaâs export sector will get a solid boost from a fuelled-up U.S. economy over the next two years, Canadaâs trade sector will be a neutral force this year, with exports expanding at nearly the same pace as imports.
The Canadian bond market was mixed on Wednesday, with the benchmark 10-year bond up 0.01% to 1.544%. The one-year bill rose 0.019% to 0.169%, while the 30-year bond dropped 0.018% to 1.936%.
The USD/CAD currency pair tumbled 0.47% to 1.2572%, from an opening of 1.2633%, at 16:21 GMT on Wednesday. The EUR/CAD fell 0.24% to 1.4769, from an opening of 1.4812.
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Original from: www.earnforex.com
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