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Forex - USD/CAD weekly outlook: June 2 - 6

Published 06/01/2014, 08:02 AM
Canadian dollar slides after weak domestic economic growth data
- - The Canadian dollar slid to session lows against the U.S. dollar on Friday after official data showed that the rate of economic growth in Canada slowed sharply in the first three months of the year.

USD/CAD touched session highs of 1.0868 before pulling back to 1.0844 at the close.

Statistics Canada reported that gross domestic product expanded 0.3% in the first quarter, slowing from growth of 0.7% in the preceding three months.

On a year-over-year basis, the Canadian economy grew 1.2%, well below forecasts of 1.8% after growing at an annual rate of 2.7% in the previous quarter.

The data dampened expectations that the Bank of Canada could adopt a slightly less dovish tone at its upcoming rate review on Wednesday. Expectations had been boosted after data earlier this month showed that the annual rate of inflation in Canada rose to the central bank’s target of 2% for the first time in in two years in April.

In the U.S., data on Friday showed that consumer spending fell 0.1% in April from a month earlier, missing forecasts for a 0.2% increase. Personal income rose 0.3%, in line with forecasts.

Separately, the final reading of the University of Michigan's consumer-sentiment index for May came in at 81.9, up slightly from a preliminary reading of 81.8, but falling short of forecasts for 82.5.

The dollar index, which tracks the dollar against six other major currencies, traded softer on Friday and was last down 0.11% at 80.44. Earlier in the week, the index rose to highs of 80.63, the most since early April.

In the week ahead, investors will be looking to Friday’s U.S. nonfarm payrolls report for May for further indications on the strength of the labor market, while Wednesday’s rate statement by the BoC will also be in focus.

Ahead of the coming week, has compiled a list of these and other significant events likely to affect the markets.

Monday, June 2

The Institute of Supply Management is to publish a report on U.S. manufacturing activity.

Tuesday, June 3

The U.S. is to produce data on factory orders.

Wednesday, June 4

The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. Also Wednesday, both the U.S. and Canada are to publish data on the trade balance.

Later in the day, the Bank of Canada is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.

The ISM is to publish a report on U.S. service sector activity.

Thursday, June 5

Canada is to release data on building permits and the Ivey PMI.

The U.S. is to publish the weekly report on initial jobless claims.

Friday, June 6

Canada is to publish data on the change in the number of people employed and the unemployment rate.

The U.S. is to round up the week with the closely watched government data on nonfarm payrolls and the unemployment rate.

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