Canadian dollar slightly higher after US GDP growth falls short of expectations

TORONTO – The Canadian dollar moved higher Friday after new data showed U.S. economic growth was slower than anticipated in the first quarter.

The loonie gained 0.31 of a cent to 101.94 cents US, while oil prices rose to a four-week high.

The U.S. Commerce Department reported that real gross domestic product grew at a 2.2 per cent annualized rate in the most recent period, a drop from three per cent in the fourth quarter of 2011.

The data also came in below the 2.7 per cent growth rate that economists had predicted.

In commodities, the June crude contract on the New York Mercantile Exchange gained 38 cents to US$104.93 a barrel, hitting its best finish since April 2.

May copper lifted 4.5 cents to US$3.825 a pound. Gold bullion prices settled higher with the June contract up $4.30 to US$1,664.80 an ounce.

Concerns about Europe’s economy have dominated global markets, with Spain’s economic problems becoming an increasing focal point. Questions about Spain’s ability to push through austerity and reforms at a time of recession and mass unemployment have been a key point of uncertainty.

Meanwhile, Statistics Canada said the Canadian economy as a whole expanded 2.6 per cent in 2011, slowing somewhat after a 3.4 per cent expansion in 2010.

And the Department of Finance said the federal government’s books were in surplus again in February, another sign that Ottawa is on track to eliminate the deficit. Ottawa recorded a surplus of $1.5 billion in February, compared with a deficit of $600 million a year earlier.

On Friday, unemployment numbers from Spain showed the jobless rate jumped to 24.4 per cent in the first quarter of 2012 — the highest rate in the 17-country eurozone.

The figures came shortly after Standard & Poor’s became the first of the three leading credit rating agencies to strip Spain of its A rating. It cited a worsening budget deficit, worries over the banking system and poor economic prospects for its decision to reduce the rating by two notches from A to BBB+. It also warned that a further downgrade was possible, leaving its outlook assessment on Spain at “negative.”

The euro also eked out a 0.4 per cent rise against the U.S. dollar to $1.3232, having initially fallen on the bad Spanish news.