Canadian Dollar Struggles for Direction amid GDP Data, Crude Prices

The Canadian dollar is struggling for direction on Tuesday as investors comb through the latest economic data and weigh near-term crude oil prices. The loonie has weakened in the last week amid renewed strength in the greenback, but the Canadian dollar is still up 0.72% against its US peer.

According to Statistics Canada, the gross domestic product (GDP) expanded 2.3% in the fourth quarter, down from the 8.9% gain in the third quarter. The GDP boost was driven by an adjustment in business inventories and gains in business spending on machinery and capital equipment, housing investment, and government expenditures. But this was offset by slumping household spending.
On an annual basis, the real GDP contracted 5.4% in 2020, the worst economic performance since the government started calculating this data in 1961. On a monthly basis, the GDP picked up a lower-than-expected 0.1% boost in December. The GDP implicit price rose 1.1% in the final three months of 2020.
This comes soon after the IHS Markit manufacturing purchasing managers’ index (PMI) edged up to 54.8 in February, up from 54.4 in January — anything above 50 indicates expansion.
The current account deficit, according to the statistics agency, narrowed by $3.2 billion to $7.3 billion in the October-to-December period.
Later this week, building permits, labor productivity, and trade figures will be released.
Weakening energy prices weighed on the loonie as markets continue to keep an eye on this week’s Organization of the Petroleum Exporting Countries (OPEC) meeting to discuss the next steps toward production. April West Texas Intermediate (WTI) crude oil futures dipped $0.01, or 0.02%, to $60.63 per barrel. Since Thursday, US crude prices have declined from around $64 to as low as $59.
Since Canada maintains a current account deficit, exports are critical for the national economy. Oil and gas remain the country’s top exports, so that any price change can affect the loonie and the broader economy.
The Canadian bond market was mixed, with the benchmark 10-year bond rising 0.015% to 1.357%. The one-year bill dipped 0.03% to 0.16%, while the 30-year bond jumped 0.029% to 1.796%.
The USD/CAD currency pair dipped 0.02% to 1.2644, from an opening of 1.2645, at 14:22 GMT on Tuesday. The EUR/CAD dropped 0.12% to 1.5218, from an opening of 1.5240.
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Original from: www.earnforex.com