USD/CAD jumps to 2-week tops near 1.33 as DXY continues to push higher

• Dismal Canadian GDP data weigh on the loonie.
• US Dollar Index extends rebound to mid-96s.

After spending the majority of the day in a relatively tight range near the 1.3150 area, the USD/CAD pair gained traction and rose to its highest level since February 15 at 1.3291.   As of writing, the pair was up 0.9% on the day at 1.3284.

Statistics Canada today reported that the real GDP in Canada contracted by 0.1% on a monthly basis in December and dragged the quarterly  growth rate down to 0.4% in Q4 from 2% in Q4, which missed the analysts’ estimate of 1.2% by a wide margin to put the loonie under a heavy bearish pressure.

Commenting on the disappointing data, “This will provide a challenging backdrop to next week’s Bank of Canada meeting. Governor Poloz has been steadfast in his view that rates need to move higher but with the sharp miss on Q4 and Q1 tracking below BoC forecasts, Poloz’s conviction may start to waver,” argued TD Securities analysts.

On the other hand, the greenback, which recovered a portion of this week’s losses in the second half of the day, extended its rebound despite the mixed macroeconomic data releases from the United States. A more-than-1% increase seen in the 10-year T-bond yield for the third straight day today provided the primary fuel to the US Dollar Index’s rally. At the moment, the DXY is up 0.28% on a daily basis at 96.50.

Today’s data from the U.S.

• US: Annual core PCE stays unchanged at 1.9% in December.
• US: Markit Manufacturing PMI drops to 18-month low of 53 in February.
• US: ISM Manufacturing PMI drops to 54.2 in February vs 55.5 expected.
• US: UoM Consumer Confidence Index drops to 93.8 (final) from 95.5 previously.

Key technical levels