USD/CAD slips to session lows as Canadian GDP outperforms expectations

US dollar slipped to session lows against its Canadian counterpart on Thursday, after an official report said that Canadian economy grew more than projected in August.

USD/CAD reached a session low at 1.0421 at 12:37 GMT, after which consolidation followed at 1.0433, losing 0.44% for the day. Support was likely to be received at October 29th low, 1.0426, while resistance was to be encountered at current session high, 1.0488.

Statistics Canada said in a report today that Canadian Gross Domestic Product grew 0.3% in August on a monthly basis, exceeding the expected 0.1% gain. Major factor behind this figure has been the increased production of crude oil and natural gas during the month. In August 2013 compared to August 2012, nations economy expanded 2.0%, marking the fastest pace since July 2012, following the 1.5% increase in July, while analysts had projected that the GDP figure will increase 1.7%.

Meanwhile, US dollar gained ground yesterday, after the Federal Reserve Bank decided to maintain the current pace of its asset purchases at its policy meeting, as widely anticipated, because more evidence of an improving economic activity was to be obtained. Fed Chairman Ben Bernanke continued to press with the unprecedented accommodative policy into the final months of his mandate, as he strives to safeguard economic expansion achieved in four years from the impact of October’s partial government shutdown.

The US central bank left without change its statement that it will probably maintain the benchmark interest rate close to zero at least as long as the rate of unemployment in the country is above 6.5% and as the inflation outlook is not exceeding 2.5%. Fed’s monthly purchases will remain divided between 40 billion USD of mortgage bonds and 45 billion USD in Treasury securities.

Additionally, earlier today the Department of Labor said in its weekly report, that the number of people who filed for unemployment assistance in the United States decreased for a third consecutive week. The number of initial jobless claims dropped by 10 000 to reach 340 000 during the week ending on October 26th 2013, while expectations pointed a larger drop, to 338 000 claims. In the beginning of October the number of claims rose mostly due to difficulties in data processing in California and lay-offs in countrys private sector due to the experienced fiscal standoff. After these issues have been resolved, however, initial jobless claims began to decrease gradually. Despite this tendency, overall employment situation in the United States remains uncertain, as private sector managed to add barely 148 000 new jobs in September, below the expected 180 000. The rate of unemployment, on the other hand, was still high, at 7.2%.

Another report showed that business activity in the Chicago region expanded the most since March 2011 in October, with the corresponding PMI rising to a value of 65.9, considerably above expectations, which pointed the index will slow down to 55.0. A month ago the index came in at 55.7. Orders and production climbed, signaling that US manufacturing sector was probably gaining traction. “Manufacturing in the Midwest is getting a lift from autos, which have been a driving force for manufacturing over the past year or so,” said Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, cited by Bloomberg. Still, “anytime you get a big swing of this magnitude, you always want to take it with a grain of salt, particularly with the slowing in the domestic economy and the heightened policy uncertainty.”

Elsewhere, the loonie, as Canadian dollar is also nicknamed, was advancing against the euro, with EUR/CAD cross tumbling 1.25% on a daily basis to trade at 1.4215 at 13:21 GMT. The euro was losing ground on a wide scale, after a string of disappointing economic data out of the Euro zone. EUR/USD recorded a new session low at 1.3608 at 13:20 GMT. GBP/CAD pair was falling 0.39% to trade at 1.6738 at 13:28 GMT.