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Canadian Dollar Slips on Weak GDP

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Canadian Dollar Slips on Weak GDP

The Canadian dollar declined Friday, falling from a three-week high versus its US counterpart amid weaker than forecast GDP figures.

The loonie tumbled to a session low of 0.9206 US before rebounding in the early session. The pair consolidated at 0.917, declining 0.12 percent.

The loonie traded at three-week highs versus the greenback Thursday after the Commerce Department said US economic growth in the first quarter was more subdued than forecast. US gross domestic product decelerated 1 percent in the first three months of 2014, falling at double the rate of the consensus.

On Friday it was Canada’s turn to post disappointing growth figures. Canada’s gross domestic product advanced at an annualized rate of 1.2 percent in Q1, official data showed. Economists forecast an annualized gain of 1.8 percent.

In other Canadian data, industrial prices unexpectedly declined 0.2 percent in April, following a 0.4 percent advance the prior month. Economists forecast no change.

Raw material prices rose 0.1 percent in April, compared to 0.7 percent the prior month. Economists forecast an advance of 0.4 percent.

In US data, personal income rose 0.3 percent in April, matching forecasts. Total income received by individuals advanced 0.5 percent in March.

Personal spending unexpectedly declined 0.1 percent, following an increase of 1 percent in March.

The daily chart confirms the bears are still in control of the USD/CAD, which means the Canadian dollar is poised for a rebound. The weaker than forecast US GDP report likely entails a reversal for the greenback, which enjoyed a solid first half of the week.

The outlook on the US dollar improved earlier in the week amid signs the US economy was improving in the second quarter. However, the policy outlook remains unchanged, as the Federal Reserve is showing no sign it is considering raising interest rates.

In Canada, a rate-hike is also out of the question for now. The Bank of Canada will meet in Ottawa June 4 to discuss monetary policy and set the interest rate. Loonie traders will monitor the rate statement to determine the BOC’s outlook on the economy, and whether it will drop negative language about interest rates now that inflation appears to be rising.

The BOC will keep its benchmark interest rate at 1 percent, unchanged since September 2010.

Consumer prices in Canada advanced 2 percent in April for the first time in two years, led by higher energy prices.

In other trading, the EURCAD advanced 0.23 percent to 1.4776, testing the daily resistance. Initial support is likely found at 1.4705.

The GBPCAD advanced 0.28 percent to 1.8172. The trend line shows initial support at 1.8060 and resistance at 1.8203.

The CADJPY declined 0.10 percent to 93.82. Initial support is located at 93.63 and resistance at 94.26.

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