USD/CAD: Canadian Dollar Climbs As GDP Beats Estimate

 | Oct 31, 2013 02:39PM ET

USD/CAD is higher on Thursday. The Canadian dollar has finally shown some upward movement, as it trades in the low-1.04 range in Thursday's North American session. The loonie received help from Canadian GDP, which posted a 0.3% gain. In the US, Unemployment Claims came in very close to the estimate, and the Federal Reserve announced that it was maintaining current QE levels.

US Unemployment Claims looked solid on Thursday, ending a string of weak employment releases. Unemployment Claims dropped from 350 to 340 thousand, edging below the estimate of 341 thousand. The recent government shutdown had pushed up claims in recent weeks as laid-off workers applied for benefits, but unemployment claims have been dropping since the reopening of the government in October. On Wednesday, ADP Non-Farm Payrolls dropped to 130 thousand in September, compared to 166 thousand the month before. This was well off the estimate of 151 thousand. It was the indicator's lowest level showing six months and underscores that the US labor market is struggling to create new jobs.

Unlike countries such as the US and the UK, Canada releases GDP on a monthly, rather than quarterly basis. The September GDP release came in at 0.3%. Although the indicator dropped from 0.6% in August, the Canadian dollar gained ground, as the GDP reading beat the estimate of 0.2%. However, with the economy marked by low inflation and weak growth, the loonie will have trouble making inroads against the US dollar if Canadian data fails to show significant improvement.

The Federal Reserve wrapped up its policy meeting on Wednesday, the first meeting since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed's policy statement was less dovish than expected, as the Fed noted that the economy was expanding "at a moderate pace" and left the door open for QE tapering in December. However, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.