USD/CAD hits fresh 3-1/2 year highs as US GDP accelerates

The loonie, as the Canadian dollar is known, traded at the lowest in 3-1/2 years against the US dollar following a report that showed the final US GDP unexpectedly accelerated in the third quarter.

Having hit a session high at 1.0737 at 13:41 GMT, USD/CAD traded at 1.0704 at 14:44, adding 0.38% for the day. Support was likely to be received at December 19th low, 1.0661, while resistance was to be encountered at May 26th 2010 high, 1.0745.

The US Bureau of Economic Analysis, released a report that showed the final GDP grew 4.1% in the third quarter, the highest final reading since the fourth quarter of 2009, beating expectations of 3.6% increase. Preliminary estimates in November pointed the GDP will rise 3.6% this month.

A separate report by the US Department of Commerce revealed the final Personal Consumption Expenditures for the third quarter rose to 2.0%, from preliminary estimates of 1.4% in November and up from analysts expectations of 1.4% increase.

The US dollar continued to be supported by the Federal Reserve decision start to reducing the pace of its monthly asset purchases to $75 billion from $85 billion, announced after its two-day policy meeting, concluded on Wednesday.

Fed Chairman Ben Bernanke announced that the central bank purchases will be divided between $40 billion in Treasuries and $35 billion in mortgage bonds starting from the beginning of 2014.

The Federal Reserve Bank decided also to keep its benchmark interest range unchanged at 0.00% to 0.25%. The central bank reassured that the benchmark rate will likely stay low, saying in its statement that “it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5% percent, especially if projected inflation continues to run below the Committee’s 2% longer-run goal”.

The greenback was pressured yesterday after a report by the US Department of Labor revealed the number of people, who filed for unemployment benefits for the week ended December 14th, increased to 379 000 from 369 000 the previous week. Analysts projected that the jobless claims will lower to 332 000.

A report by the National Association of Realtors, added pressure on the greenback, showing that home resales fell for a third straight month to a one-year low in November. Existing home sales slid to 4.9 million, trailing projections for a drop to 5.03 million from October’s 5.12 million used homes sold.

Meanwhile, Statistics Canada reported the nations CPI remained flat in November, defying analysts projections of 0.1% increase. The CPI in October declined 0.2%. The CPI rose at an annualized rate of 0.9% in November, compared to a year ago, short of projections of 1.0% increase. In October the CPI rose to 0.7%, compared to a year earlier.

The Canadian dollar was supported by the crude oil price, the nations largest export. Prices of crude oil touched a two-month high.

Elsewhere, having hit a session low at 1.6319 at 08:40 GMT, GBP/USD traded at 1.6341 at 12:49 GMT, losing 0.20% for the day. On December 18th, the pair touched 1.6485, the highest level since August 23rd 2011. Support was likely to be received at December 18th low, 1.6273, while resistance was to be encountered at December 19th high, 1.6396.