USD/CAD Breaks 1.09, Loonie Slide Worsens

 | Jul 30, 2014 12:14PM ET

The shaky Canadian dollar continues to lose ground on Wednesday. USD/CAD, propelled by an outstanding US GDP report, has pushed over the 1.09 level. Elsewhere in the US, ADP Nonfarm Payrolls softened in June, and the Federal Reserve will release a policy statement later in the day. In Canada, the Raw Materials Price Index looked sharp last month, posting a 1.1% gain.

In the US, Advance GDP soared in Q2, posting a gain of 4.0%. This easily beat the estimate of 3.1%. The boost in economic activity was boosted by strong consumer confidence and business activity in Q2. Meanwhile, ADP Nonfarm Payrolls was unable to keep pace. The key employment indicator dropped to 218 thousand, compared to 284 thousand a month earlier. This was well off the estimate of 234 thousand. If the official Nonfarm Payrolls follows suit with a weak reading, the US dollar could give up its recent gains.

If CB Consumer Confidence is any indication, the US consumer is brimming with optimism about the economy. The key indicator jumped to 90.9 points, crushing the estimate of 85.5 points. This was the indicator's highest level since September 2007. Consumer confidence is closely tracked by analysts since a confident consumer is likely to increase consumption, which is critical for economic growth.

Like its giant southern neighbor, Canada has suffered from very low inflation levels, indicative of an underperforming economy. On Wednesday, there was some positive news as the Raw Materials Price Index posted a strong gain of 1.1%, a four-month high. This easily beat the forecast of 0.6%. The markets will be hoping for more good news from GDP on Thursday. The indicator is expected to improve slightly in June, with the estimate standing at 0.3%.