Canadian dollar lower, May economic growth comes in slower than expected

TORONTO – The Canadian dollar was lower Wednesday as the economy performed weaker than expected during May.

The loonie was down 0.09 of a cent to 96.98 cents US as Statistics Canada reported that gross domestic product grew by 0.2 per cent. Economists had looked for a 0.3 per cent rise from April.

The growth picture was better in the U.S., where GDP grew at an annualized rate of 1.7 per cent during the second quarter, higher than the one per cent advance that was expected.

There was also some positive news two days before the release of the U.S. government’s release of employment data.

Payroll firm ADP reported that private sector employment increased by a better than expected 200,000 during this month. Economists expect the economy cranked out about 190,000 jobs during July.

Traders also looked to the end of a two-day meeting of the U.S. Federal Reserve on interest rates. The central bank makes its announcement at 2 p.m. EDT.

There has been much speculation surrounding the Fed over the last two months, since chairman Ben Bernanke first mentioned that the central bank could start to taper its US$85 billion of monthly bond purchases later this year if economic conditions warrant. This key piece of economic stimulus is credited with keeping long term rates low and fuelling a strong rally on markets.

Commodity prices were higher as the September crude contract in New York up 59 cents to US$103.67 a barrel.

September copper rose three cents to US$3.07 after falling seven cents Tuesday. December bullion shed early gains following the release of the positive jobs and economic growth data, falling $1.90 to US$1,322.90 an ounce.