Canadian Dollar Retreats on Weak US GDP, Despite Positive Manufacturing Prices Data

The Canadian dollar fell against most of its major peers on Tuesday, following a report that revealed that gross domestic product in the United States, Canada’s biggest trade partner, was weaker than expected. Another report in Canada, which showed healthy inflation in the manufacturing sector, failed to push the loonie into the positive territory.

The US Bureau of Economic Analysis released a report containing its second estimate for gross domestic product in the fourth quarter of 2016 at 13:30 GMT today. The report said that gross domestic product increased at an annualized rate of 1.9% in the last quarter, from 3.5% in the third quarter of 2016. However, analysts had expected the growth rate to be at 2.1% in the fourth quarter.

The bureau said that even though personal expenditures, local government spending, and inventory investment improved, gross domestic product decelerated due to a bigger downturn in exports. Increased imports also contributed to the deceleration, along with lower federal government spending.

In Canada, Statistics Canada published a report on raw materials price index in January, showing an increase of 1.7% following a 6.5% gain in December 2016. The index, which measures inflation in the manufacturing sector, mainly rose due to increases in prices for animals and animal products.

Investors in Canada and the United States are anticipating Donald Trump’s address to Congress at 02:10 GMT on Wednesday, in which the president is expected to reveal more details on his tax reform plans. One of Trump’s main promises during his election campaign was to reduce corporate taxes, a promise that might negatively impact the Canadian dollar if fulfilled.

USD/CAD traded at 1.3300 as of 21:15 GMT on Tuesday, from 1.3308 at 21:05 GMT, the pair’s highest level since January 23. USD/CAD kicked off trading today at 1.3192.

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