The Canadian dollar hits its lowest level in 3.5 months after GDP unexpectedly shrinks

Canadian dollarMarkets InsiderThe higher the chart goes, the weaker the Canadian dollar gets.
  • The Canadian dollar is trading at its lowest level since early July after Canada’s GDP unexpectedly shrank in August.
  • The currency has lost about 7% since the Bank of Canada hiked rates at its September meeting.

The Canadian dollar, or loonie, is trading at its lowest level since early July, down 0.46% at 1.2893 per US dollar, after Canada’s GDP unexpectedly shrank in August.

Tuesday’s GDP report showed the Canadian economy contracted 0.1% month-over-month, making for its first negative print in a year. Wall Street economists were expecting 0.1% mum growth. Additionally, the economy grew at a 3.5% year-over-year clip, missing the 3.6% growth economists were anticipating.

The loonie has been under pressure, falling about 7%, since shortly after the Bank of Canada surprised markets with a rate hike at its September meeting. At the time, the BOC said, “Recent economic data have been stronger than expected, supporting the Bank’s view that growth in Canada is becoming more broad-based and self-sustaining.”

As for where the Canadian dollar goes from here, Bank of America Merrill Lynch’s John Shin says he’s looking for 1.30 per dollar at year-end and three rate hikes in 2018.

“To the extent that rates have been driving the currency, we note that although our Canada Economics team ultimately looks for 3 rate hikes in 2018 out of the BOC, our US Economics team looks for a matching 3 rate hikes out of the Federal Reserve,” Shin wrote.

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