Dollar hits 90 cents US on strong GDP report
The Canadian dollar topped90 cents US for the first time in seven months on Monday following a stronger-than-expected GDP report.
The economy grewby 0.4 per cent in February, thanks to higher activity in the energy sector, Statistics Canada said Monday. That was twice the growth rate forecast by analysts and led to speculation that the Bank of Canada would move sooner to raise interest rates.
“Upside surprises to the growth side will boost the odds that the Bank [of Canada]will be in rate hike mode earlier than our baseline forecast call for [0.75 percentage points] in the second half of next year,” RBC economist Dawn Desjardins said in a morning commentary.
The loonie was trading at 90.32 cents US in noon hour ET trading, up 0.71 cents from Friday’s close. The dollar has risen by more than three cents in April.
Statistics Canada said wholesale trade, manufacturing and financial services posted gains in February. However, there were declines in construction, retail trade, rail transportation and the accommodation and food services sector.
The energy sector saw a gain of 2.9 per cent as two months of mild weather gave way to more seasonable winter conditions. Electric power generation was up 3.4 per cent, while oil and natural gas extraction was up by 3.6 per cent.
Industrial production, which includes the output of mines, utilities and factories, advanced 1.3 per cent in February, with all three sectors posting gains.
Excluding oil and gas extraction and utilities, February’s economic activity grew 0.2 per cent.
A 15-day strike in February by conductors and yard-service employees at CN Rail led to a drop of 5.4 per cent in output of the rail transportation industry. This negatively affected exports in February, and led some enterprises to increase their use of trucking services to move their goods. Activity in the trucking sector grew by 0.6 per cent.
February’s growth figure topped the 0.1 per cent seen in January.
“This is just yet another sign that the Canadian economy is faring well in the face of a U.S. slowdown, and is clearly good news for the already high-flying Canadian dollar,” said BMO Capital Markets economist Doug Porter.
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