Home Daily Commentaries Growth of Canadian economy stronger than expected

Growth of Canadian economy stronger than expected

Daily Currency Update

Canadian real GDP grew at an annual rate of 3.1% in the first quarter of 2023 according to Statistics Canada’s report earlier today. This print followed the 0.1% contraction in the last quarter of 2022 and came in better than the market expectations for an expansion of 2.5%. Statistics Canada further added that "favorable international trade and growth in household spending were moderated by slower inventory accumulations as well as declines in housing investment and business investment in machinery and equipment.” The USD/CAD retreated moderately from daily highs in reaction to this data release and was last seen trading at 1.3625. Tumbling oil prices act as a tailwind for the pair, undermining the commodity-linked Loonie. Oil prices have dipped as concerns grow over the ongoing US debt ceiling. In addition, unimpressive factory data and a decline in manufacturing growth from China further weighed on prices. West Texas Intermediate (WTI) oil was last seen trading at 68 and Brent crude oil was just under 73.

Key Movers

The euro fell by as much as 0.7% today after various sets of data showed a quick cooling of consumer price pressures in Europe’s two largest economies - France and Germany. The EUR/USD slid below 1.07 and is expected to remain under bearish pressure. Markets are anticipating the European Central Bank (ECB) to raise rates to a high of about 3.70% by the month of September, from the current 3.25%. Inflation in Germany, measured by the change in the Consumer Price Index (CPI), declined to 6.1% year-over-year in May from 7.2% in April. This reading came in below the market expectations of 6.5%. The annual Harmonized Index of Consumer Prices (HICP) rose 6.3% this month, compared to 7.6% in April and market estimates of 6.8%.

Sterling snapped its 3-day winning streak below 1.24 due to sinking UK business confidence, continuing inflation, and the Bank of England’s (BoE) ineffectiveness to curb rising prices. Earlier today, Lloyds Bank published the monthly releases of its business sentiment gauge and inflation signals for May. As per Reuters report, “The Lloyds Bank Business Barometer fell to 28% in May from 33% in April, its first decline since February, but in line with the survey's long-term average.”

Data out of China showed weak economic numbers which in turn boosted the USD. A survey released during the European trading session showed China's factory activity contracted faster than expected in May. The Chinese yuan plummeted to a six-month low at 7.133 against the USD.

Expected Ranges

  • EUR/CAD: 1.4522 - 1.4609 ▼
  • GBP/CAD: 1.6840 - 1.6906 ▲
  • AUD/CAD: 0.8810 - 0.8870 ▼
  • USD/CAD: 1.3589 - 1.3651 ▲