Canadian dollar retreats from 2-1/2-month high after sharp GDP drop By Reuters

© Reuters. A Canadian dollar coin, commonly known as the “Loonie”, is pictured in this illustration picture taken in Toronto

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar was little changed against its broadly weaker U.S. counterpart on Friday as data showed a deep slump in the domestic economy in the first quarter, with the pulling back from an earlier two-and-a-half-month high.

Canada’s GDP fell at an annualized rate of 8.2% in the first quarter as a result of reduced spending and widespread shutdowns of non-essential businesses in March due to the coronavirus pandemic, Statistics Canada said. In a flash estimate, Canada’s national statistics agency projected an 11% decline for GDP in April from March.

“Our expectation is for a 40% plunge in Q2 as the economy is devastated by the lockdowns,” said Ryan Brecht, a senior economist at Action Economics. “The easing of those measures so far in May suggests that the economy bottomed out in April.”

The Canadian dollar was trading nearly unchanged at 1.3767 to the greenback, or 72.64 U.S. cents. The currency touched its strongest intraday level since March 12 at 1.3714.

For the week, the loonie was on track to gain 1.6%.

The decline for the loonie came as the price of oil, one of Canada’s major exports, was dragged lower by weak U.S. fuel demand, fears of a second wave of coronavirus cases in South Korea and a worsening in U.S.-China relations. prices were down 2.4% at $32.9 a barrel.

Global stock markets fell as investors awaited Washington’s response to China’s move to tighten control over Hong Kong, while the U.S. dollar lost ground against a basket of major currencies.

Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year was down 2.9 basis points at 0.531%.


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