After trading in a remarkably tight range last week, USDCAD extends to the upside as data shows Canada’s economy didn’t expand in July.

While one data point in itself isn’t a direct cause for concern, hence why USDCAD didn’t crack above 1.33 upon the release, it adds to the underlying theme of moderating growth in Canada.

July’s GDP data extends a four month slowdown in the economy’s expansion from March’s peak of 0.5%. While the figure in March was likely to be transitory due to the economy rebounding from the Q4 slowdown, today’s data highlights some concerns in the global economy.


Chart 1: Muted reaction in USDCAD following GDP release as the economy ticks along at a slow pace in July

Copyright: Bloomberg Finance LP.

Sub-indices of the report added to a string of negative manufacturing survey data globally this morning. The goods industry contracted some 0.7% in July with all subsectors declining with the exception of utilities.

Befitting with data from Sweden, the Eurozone, the UK, and even South Africa this morning, Canada’s construction and manufacturing sectors also contracted.

Construction fell by 0.7% in July, almost negating the expansion from the prior two months, while the manufacturing sector continued June’s 1.3% decline to contract 0.1% in July.

The global trend is becoming clear and FX markets have grappled with growth concerns at the start of Q4 today.

If this theme is set to continue towards the end of the year under a blanket of stalling US-China trade talks, the Canadian economy looks better poised to weather the storm than G10 counterparts.

This was evident yesterday as the loonie made advances against the greenback at quarter-end, the only G10 currency to do so.

In relative terms, growth of around 1.3% YoY with a rolling quarterly rate of 0.8% growth is not a concern for investors and the BoC just yet, especially as growth levels plummet globally.



Author: Simon Harvey, FX Market Analyst at Monex Canada


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