Canadian Dollar Strengthens Amid Better-Than-Expected November GDP

The Canadian dollar strengthened against its US peer to close out the trading week, capping off a disappointing month as the greenback recorded gains against most of its currency competitors. The loonie found support on a decent economic performance toward the end of last year, suggesting that the economy is recovering at a modest pace, despite the likelihood that the nation contracted last year. Can the loonie recover in February?

According to Statistics Canada, the Canadian economy advanced 0.7% in November, up from the 0.4% jump in October. The market had penciled in a gross domestic product (GDP) bump of 0.4%. It also represented the seventh consecutive monthly expansion in the national economy, buoyed by 14 of the 20 industrial sectors posting gains.
For the full year of 2020, Statistics Canada’s preliminary forecast suggests the economy contracted 5.1%. TD Bank economist Sri Thanabalasingam told CBC News that it is important to not be overly optimistic, despite the positive November reading.

Let’s not get too far ahead of ourselves. The road ahead is challenging, and growth appears to be slowing. Even at the 0.3 per cent estimated pace of growth in December, it would take until November this year for the economy to get back to its pre-pandemic level.

The statistics agency reported that the industrial product price index (PPI) jumped 1.5% last month, slightly higher than the market estimate of 1.4%. There widespread price hikes in energy, lumber, and metals. The PPI ballooned at an annualized rate of 1.8%.
Raw materials prices surged 3.5% in December, up from 0.6% in November. Year-over-year, raw materials prices slipped 0.7% last month.
Earlier this week, it was reported that building permits slumped 4.1% in December, while average weekly earnings climbed 6.6% year-over-year in November.
Falling energy prices weighed on the loonie to finish the trading week. March West Texas Intermediate (WTI) crude oil futures dropped $0.24, or 0.46%, to $52.10 a barrel. March natural gas futures tumbled $0.042, or 1.58%, to $2.6222 per million British thermal units (btu).
Canada maintains a current account deficit, so the economy relies on exports for growth. Since oil and gas are the country’s largest exports, any significant price change can affect the loonie and the broader economy.
The bond market was mixed on Friday, with the benchmark 10-year bond up 0.017% to 1.072%. The one-year note dipped 0.005% to 0.81%, while the 30-year bond jumped 0.014% to 1.833%.
The USD/CAD currency pair declined 0.21% to 1.2804, from an opening of 1.2830, at 17:04 GMT on Friday. The EUR/CAD fell 0.12% to 1.5535, from an opening of 1.5555.
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Original from: www.earnforex.com