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Canadian Dollar Weakens as GDP Data Supports Bank of Canada’s Caution

(Fergal Smith – Reuters)

The Canadian dollar weakened against its U.S. counterpart on Tuesday after data showing a surprise contraction of the domestic economy supported the Bank of Canada’s caution on further interest rate hikes.

Canada’s gross domestic product declined 0.1 per cent in August following flat growth in July, in part due to maintenance shutdowns in major industries. Analysts had forecast an increase of 0.1 per cent.

“Any piece of data that would confirm the Bank of Canada’s caution would have an outsized effect on the currency,” said Eric Theoret, currency strategist at Scotiabank. “The Canadian dollar was vulnerable.”

Canada is at a “crucial” spot in the economic cycle with significant uncertainties clouding the way forward, Bank of Canada Governor Stephen Poloz said. Click here to read more.