Economists expect weak GDP data and an increase in U.S. interest rates will continue downward pressure on the loonie
TORONTO—The Canadian dollar drifted closer to the 80-cent U.S. level January 26 morning as the American currency strengthened ahead of this week’s interest rate meeting by the U.S. Federal Reserve.
The loonie declined 0.2 of a cent to 80.29 cents US.
The currency tumbled 3.5 per cent last week to its weakest level in six years after the Bank of Canada surprised markets last week with a quarter-point cut in its key overnight rate to 0.75 per cent.
The U.S. Federal Reserve holding its interest rate meeting January 28. The Fed has been widely expected to start moving rates away from near zero around the middle of this year and traders will be looking for any sign that the central bank could move earlier.
Other major data points this week include the latest economic growth figures for Canada and the U.S.
Economists expect that Canadian gross domestic product grew a slight 0.1 per cent during November, reflecting disappointing reports for manufacturing and wholesale sales. Oil prices started to collapse at the end of that month and analysts note that future GDP reports will detail how that decline is affecting the economy.
Prices have fallen more than 40 per cent since the end of November when Saudi Arabia rejected calls to cut production in order to support prices. Overall, prices are down about 55 per cent from the highs of last summer as the marketplace works through a huge imbalance in supply and demand.
On Monday, the March crude contract in New York gained 25 cents to US$45.84 a barrel.
In the U.S., fourth quarter GDP is expected to come in at an annualized rate of 3.1 per cent, down from a five per cent pace in the third quarter.
Elsewhere on commodity markets, February bullion faded $9.80 to US$1,282.80 an ounce while March copper added a cent to US$2.51 a pound.