As news came in yesterday that Canada’s economy shrank by 0.2 per cent on account of slow mining and manufacturing output, the Loonie took a hit, “trading 46 basis points lower than Friday’s close at US$1.0148,” according to the Financial Post.
Something else was affected, too: the prospect of Bank of Canada head Mark Carney rising interest rates this summer to control a growing appetite for debt—which he sees as the biggest threat to Canada’s economy.
From the Globe:
A surprise dip in gross domestic product suggests the economy has less strength than Bank of Canada policy makers had thought, reducing market expectations for a summer interest-rate hike.
Although, it doesn’t mean it’s guaranteed that rates won’t go up this year. Quoting Doug Porter, deputy chief economist at BMO Nesbitt Burns, the Globe continues:
“The Bank has sent a pretty strong message that they’re not comfortable with rates at current levels,” he said, “so they just need to be convinced that this was a one-month wonder and that the economy is back onto a 2-per-cent-plus growth track, to get them hiking.”