Loonie gains and retracts to remain flat
Friday 28 April, 2023
Daily Currency UpdateThe Loonie made gains against the USD during the initial trading hours but later retraced its steps. USD/CAD was seen grinding near the intraday high and reversing the previous day’s losses. The data released by Stats Canada showed the real GDP in Canada grew by 0.1% in February. This reading followed January's expansion of 0.6% and came in weaker than the market expectation for a growth of 0.2%. Flash estimates from the month of March hint that the Canadian economy likely grew 2.5% year-over-year in the first quarter. The Bank of Canada (BoC) had forecasted a 2.3% rise in GDP in the first quarter. The BoC, which raised the interest rates at a record frequency during the last year to control and cool the economy and pull the prices down, anticipates slightly positive yet weak growth during the remainder of this year. The BoC has left the key policy rate at a 15-year high of 4.5%. Oil prices moved slightly towards the higher side, but another monthly decline is suspected amid concerns of slowing global economic growth weighing heavily on crude demand as the year progresses. West Texas Intermediate oil was last seen trading at the 76.35 level.
Key MoversThe sterling remains on the positive side against the USD for the third straight day, climbing to a two-week high trading at the 1.2540 level. GBP/USD is oscillating slightly due to rising expectations for another 25 basis point (bps) rate hike by the Bank of England (BoE) in May.
The EUR/USD pair has bounced back slightly to just below the 1.1000 level, as the USD relinquished some gains and markets are still digesting disappointing results from the Economic and Monetary Union (EMU) as well as German annual HICP inflation data. Inflation in Germany declined to 7.2% on a yearly basis in April from 7.4% in March. This reading came in below the market expectation of 7.3%. Markets are eagerly waiting to hear the European Central Bank’s decision about upcoming rate hikes as to whether it will hike rates by 25 or 50 bps. The lower-than-expected inflation data from Germany hints it may be the former.
Another macroeconomic development shows Argentina has joined the club yuan and will conduct foreign trade business with China in yuan rather than USD. Argentina announced that they will begin to pay for Chinese imports in yuan rather than USD to limit the USD outflows.
- EUR/CAD: 1.4969 - 1.5022 ▲
- GBP/CAD: 1.6971 - 1.7066 ▲
- AUD/CAD: 0.8961 - 0.9026 ▼
- USD/CAD: 1.3555 - 1.3665 ▼