The Euro to Canadian Dollar (EUR/CAD) exchange rate strengthened more than 0.55% on Friday afternoon.
The Euro to Canadian Dollar (EUR/CAD) exchange reached a session high of 1.3752
Speculation that the Bank of Canada will cut interest rates again this year were heightened on Friday as Gross Domestic Product data out of the North American nation came in worse than economists had been expecting.
According to Statistics Canada, GDP fell at an annualised rate of -0.6 in the first quarter of 2015. The figure was a sharp reversal on the revised 2.2% growth figure seen in the final quarter of 2014 and was worse than the 0.3% rise expected. On a quarter-on-quarter basis the Canadian economy was show to have contracted by -0.2%, a fall from the -0.1% seen in the last quarter and was below forecasts for a rise of 0.2%. The quarterly contraction was the first seen since 2011 and the annual decline was the sharpest seen since 2009.
“The Canadian GDP results were plain awful, with the worst performance since the 2008-2009 recession,” said Krishen Rangasamy, senior economist at National Bank of Canada.
Following the release of the data, the Canadian Dollar fell to a two-day low against the Euro and weakened against the US Dollar.
‘Most worryingly, things seemed to be getting worse as the first quarter went on. The Bank of Canada’s single 25 basis point rate cut in January may not have been enough insurance against the oil price slump after all,’ said Paul Ashworth, an economist from Capital Economics.
Oil prices impact on Canadian GDP
The poor data was a result of falling oil prices, and contractions in the mining, quarrying, oil, and gas extraction sectors. A pullback in investment and unusually harsh winter combined to add to the Canadian economy’s woes.
With Canadian, US, Brazilian and other nations GDP figures all disappointing concerns that the global economy is stalling are set to rise.
The Euro meanwhile was continuing to receive support from better-than-forecast retail sales data out of Germany and an easing in concerns over the Greek situation. Looking ahead to next week the EUR/CAD exchange is likely to strengthen further as speculation as to whether the BoC will cut interest rates will weigh on the ‘Loonie’. The single currency meanwhile will be influenced by a host of important data releases, chief of which will be Eurozone unemployment and inflation reports.