Canadian GDP Data due Monday
Canadian fundamentals will take centre stage Monday when Statistics Canada reports on gross domestic product for the month of April. The reading is expected to show Canada’s economy expanded slightly in April following a disappointing first quarter that was weighed down by inclement weather.
Monday’s report could show Canada’s economy expanded 0.1 percent in April, following an identical increase the previous month.
The Canadian economy accelerated just 1.2 percent in the first quarter, well below estimates calling for 1.8 percent.
Real gross domestic product increased 0.3 percent in the first three months of 2014, following a gain of 0.7 percent the prior quarter. First quarter growth was the slowest since 2012, StatsCan confirmed last month.
An unusually harsh winter gripped the country in the early part of the year, slowing down business spending, government spending and household consumption. Unlike the United States, which saw its economy contract at the steepest rate since 2009, Canada remained on the positive side of growth, propelled higher by a strong resource sector.
However, stripping out the addition from imports, Canada’s economy contracted at an annualized rate of 0.3 percent.
Monday’s report comes amid signs the Canadian economy was improving in the second quarter. StatsCan last week said retail sales surged 1.1 percent in April, the biggest advance in 11 months.
Retail sales volume – the component used to calculate real GDP – advanced 0.8 percent.
Separately, StatsCan also reported the biggest gain in consumer prices in more than two years. Canada’s consumer price index surged 2.3 percent annually in May, after reaching the Bank of Canada’s 2 percent target for the first time in two years.
Rising inflation casts doubts about the BOC’s likelihood to cut interest rates, which it has promised to do should the economy stagnate.
Canada’s benchmark lending rate has been at 1 percent since September 2010.
The Canadian dollar, which has been supported all week by stronger Canadian fundamentals and mixed US data, could see significant price action Monday. The retail sales and CPI figures suggest the Canadian economy was rebounding at a strong pace in the second quarter, defying speculators’ attempts to drive down the loonie.
The USDCAD declined 0.19 percent to 1.0670 on Friday. The pair is on pace to decline by around a quarter of a percent this week. The USDCAD is testing initial support at 1.0672. A break below this level would expose 1.0654 as the next target. On the upside, resistance is likely found at 1.0717.
In other trading, the Canadian dollar declined against the Japanese yen, which posted strong CPI figures in the Asian session. The CADJPY declined 0.17 percent to 94.99. Initial support is likely found at 94.86 and resistance at 95.34.
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