Loonie declines after solid advance, traders look to GDP data, OPEC meeting

TORONTO – The Canadian dollar closed lower Monday ahead of the latest economic growth figures coming out later in the week.

The loonie was down 0.4 of a cent to 88.58 cents US following a strong run last week that saw the currency run up almost a third of a cent.

Recent performance was helped, in part, by a strong wholesale trade report and higher than expected inflation date for October, which raised speculation about when the Bank of Canada might hike interest rates.

Next up, Statistics Canada releases its reading on September gross domestic product and the third quarter on Friday. Economists expect that the agency will report that GDP rose by 0.4 per cent after dipping 0.1 per cent in August, adding up to an annualized pace of 2.1 per cent.

Investors will also get information this week on how the U.S. economy is performing.

The American GDP data comes out Tuesday. It is the second revision to third-quarter GDP and it is generally expected that it will show growth softened a bit to an annual pace of 3.3 per cent compared with an earlier reading of 3.5 per cent, reflecting weakness in the Chinese economy and a deteriorating European economy that is struggling to stay out of recession.

Meanwhile, a survey released Monday showed German business confidence rose in November after six consecutive months of declines.

The Ifo institute said that its confidence index rose to 104.7 points in November from 103.2 points in October. Business leaders’ assessments of their current situation and their expectations for the next six months both rose.

Commodity prices were lower with the January crude contract in New York down 73 cents to US$75.78 ahead of a meeting of the OPEC cartel on Thursday. The major question on markets is whether the Organization of Petroleum Exporting Countries will respond to sharply lower prices by cutting production in order to stabilize prices.

Prices have tumbled about 30 per cent from mid-summer amid rising supplies, lower demand and a strengthening greenback that has pressured all commodities priced in U.S. dollars.

Meanwhile, the December copper contract dropped three cents to US$3 a pound and the December gold contract lost $2 to US$1,195.70 an ounce.