- USD/CAD remains stable around 1.3830 after US/Canada GDP data release.
- The US economy contracted 0.3% in the first quarter of the year due to increased import, the first decline of three years.
- The Canadian economy was rejected by 0.2% in February, while expected to remain flat.
The USD/CAD pair did not move much and remained around 1.3830 during the North American Trading session Wednesday after the release of Gross Domestic Product (GDP) data of both the United States (US) and Canada.
The US Dollar (USD) faces slight sale of pressure after the US Bureau of Economic Analysis (BEA) reported an economic backward for the first time in three years due to a sharp advancement in imports. The US economy was rejected by 0.3% in the first quarter of the year on an annual basis. Economists expect a moderate growth of 0.4% in flash estimates against a steady growth of 2.4% seen in the last quarter of 2024.
Business -owned people have imported a large amount of goods to avoid additional tariffs imposed by US President Donald Trump on April 2.
Meanwhile, data change data in the US ADP for April also came to the weaker than expected. The ADP reported that the private sector had added 62K, which was significantly lower than the expectations of 108K and the earlier reading of 147K.
Poor work growth and negative GDP points in economic disturbance, which are expected to boost market expectations that may begin to reduce Federal Reserve (FED) interest rates from the June policy meeting. For the May conference, traders are almost confident that the central bank continues to borrow borrowing rates at a range of 4.25%-4.50%.
Separately, the Canadian economy also contracted in February, as economists expect a flat GDP growth. The economy declined 0.2% after a 0.4% growth in January. February's GDP data impact is expected to remain limited to the Canadian dollar (CAD) while investors are looking for cues in Canada's economic performance after the imposition of tariffs on vehicles.
GDP FAQs
A country's gross domestic product (GDP) measures its economic growth rate over a given time period, usually a quarter. The most reliable numbers were those comparing GDP to the previous quarter eg with Q2 of 2023 vs Q1 of 2023, or the same period last year, e.g. Q2 of 2023 compared to Q2 of 2022. The annual quarterly GDP figure releases the quarter growth rate if it is similar for the rest of the year. These can be misleading, however, if temporary shocks affect growth in a quarter but are not likely to last yearly – as happened in the first quarter of 2020 in the outbreak of covid pandemic, when the growth drops.
A higher GDP result is usually positive for a country's money because it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as to attract higher foreign investment. With the same token, when the GDP falls it is usually negative for money. When an economy grows people tend to spend more, leading to inflation. The central bank of the country then has to put interest rates to combat inflation with the impact of attracting more capital flows from global investors, thus helping the local currency to appreciate.
When an economy grows and GDP rises, people tend to spend more leading to inflation. The central bank of the country then has to put interest rates to combat inflation. Higher interest rates are negative for gold because they increase the cost of handling gold compared to putting money into a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for gold price.
