Loonie to Rise on Stronger GDP, Expected Upbeat US Data

AUD/CAD Fundamental Analysis

The Australian dollar is deemed to continue outclassing its Australian counterpart after the Canadian economy tallied its fastest pace of growth in seven months in November as factories and natural resources firms ramped up activity. Today, outlook for the Loonie likely continues to be up amid positive expectations for economic reports from the US, including the vital Non-Farm Payrolls report.

The Canadian economy grew faster than expected in November, expanding 0.3 percent after a lackluster 0.1 percent rise in October and a flat reading in September, StatsCan reported yesterday. The goods side of the economy drove the monthly growth, growing 0.6 percent, as manufacturers, miners and energy companies contributing to GDP. Going further into detail, mining and oil and gas extraction advanced 0.8 percent, wholesale trade inclined 0.7 percent while retail activity gained 0.6 percent. Meanwhile, the services side of the economy expanded 0.1 percent. Although the report is unlikely to alter the Bank of Canada’s view that annualized fourth quarter growth would only be 1.0 percent, analysts say the figure does improve the outlook for Q4 and beyond, suggesting some momentum going into 2013.

Likewise, the Canadian dollar is likely to receive support from upbeat economic updates south of the border. For one, economists expect that the US economy generated jobs at another encouraging pace in January. Non-farm payrolls are estimated to have increased by 161,000 last month after a 155,000 gain registered in the previous month. Economists are even predicting that a higher figure could be released after the ADP private sector payrolls report increased more than expected last month. Later on, the Institute for Supply Management is also awaited to reveal that factory conditions improved marginally in January, with the Manufacturing PMI estimated to increase from 50.7 points to 50.8 points. Construction spending in the US is also deemed to have improved with a 0.6 percent rise after a 0.3 percent drop in the previous month. With improvements in the US brightening prospects for the Canadian economy, a short position favoring the Loonie is recommended today.

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