The USD/CAD Forex pair rallied for a 4th straight day on Thursday, climbing to a 56-day high of 1.3394. The Canadian dollar has been losing ground against the USD since the beginning of this week, when the exchange rate was hovering around 1.31.
Since Monday, the CAD has lost about 2.23%. The CAD’s poor performance this week was also driven by not-so-positive news from the Canadian central bank, which decided to keep interest rates unchanged at 0.5% on Wednesday.
The Bank of Canada said:
“While there have been recent gains in employment, subdued growth in wages and hours worked continue to reflect persistent economic slack in Canada, in contrast to the United States.”Following Wednesday's interest rate news, the CAD slipped even lower against the USD:
The Canadian dollar sustained further losses on Thursday when Canadian GDP figures for the fourth quarter of 2016 showed slowing imports, business investment and business inventories:
-Imports of goods fell 4.1%.
-Business gross fixed capital formation declined 2.1%.
-Business investment in non-residential structures dropped 5.9%.
-Businesses reduced their inventories by $5.0 billion in Q4 of 2016.
-Non-farm inventories declined by $4.8 billion.
-Manufacturing inventories posted declines of $6.9 billion.
-Retail inventories declined by $1.4 billion.
-Mineral exploration and evaluation declined 21%.
For all of 2016, Statistics Canada said much of the growth occurred in the first two quarters, with a “deceleration” taking place in Q4. Besides the slowing Canadian economy, the strengthening U.S. dollar has had a considerable impact on the USD/CAD exchange rate.
Over the last four days, the U.S. Dollar Index (DXY) has rallied close to 1.5% to a 49-day high of 102.20. The dollar’s gains were primarily the result of rising CB consumer confidence and Trump’s “America First” speech to Congress on Tuesday, which lifted the USD considerably:
At 1:45 p.m. EST, the USD/CAD is still maintaining its bullish momentum; the currency pair is currently trading at 1.3395, just 5 pips away from 1.34!
CAD banknote photo by valakirka