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Canadian dollar backtracks ahead of Fed announcement

H.S. Borji
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www.finances.com
Canadian dollar backtracks ahead of Fed announcement

The Canadian dollar was lower Wednesday, but remained well supported above 91 US cents ahead of a key monetary policy announcement from the US Federal Reserve.

Both countries released economic growth reports Wednesday. Canada’s gross domestic product accelerated 0.2 percent in February, in-line with forecasts, according to the government’s statistics department. Increases in mining, oil and gas extraction and manufacturing led the advance, official data showed. Output in service activity edged up 0.1 percent, led by wholesale trade, retail trade and food services.

In the United States, economic growth was barely noticeable in the first quarter, the Commerce Department confirmed today in Washington. Gross domestic product expanded 0.1 percent annually in the first three months of the year. Economists expected first quarter growth to slow to 1.3 percent annually following a gain of 2.6 percent in the fourth quarter.

In the morning session the Canadian dollar was trading at 0.9116 US, recovering from a low of 0.9107. The headline USDCAD pair was trading at 1.0969, up 0.2 percent. Initial support is likely found at 1.0898. On the upside, technical resistance is likely found at 1.0987.

The pair could gain considerable traction later in the day after the Federal Reserve delivers its policy announcement. The Fed is targeting 2014 as the end date to quantitative easing, a program that has injected more than $4 trillion into the financial markets since 2009.

The Fed is expected to make another stimulus reduction at today’s rate meetings, bringing the total asset purchase program to $45 billion per month. The central bank initiated its first stimulus cut in December, citing strong improvements in the US economy.

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