Better Than Expected Q 3 GDP Figures
The US dollar surrendered gains made earlier in the week as third quarter GDP figures showed that US GDP rose 3.5% better than earlier predictions of 3.3%. The unexpected gain spurred a rise in stocks and commodities and sent currency traders and investors in search of higher yielding currencies. Once again the Aussie and Kiwi dollars were the big winners gaining a full 2% against the greenback. The Aussie which has a benchmark rate of 3.25% traded at US$0.9146 after trading as high as US$0.9162 earlier in the trading session. The Kiwi dollar rose as high as US$0.7352 and last traded at US$0.7342.
Canadian Dollar Lifted by Rise in Stocks and Commodities
The Canadian dollar rose as stocks and commodities surged due to US third quarter GDP results. Benjamin Reitzes of BMO Capital Markets stated, “U.S. growth is good news for growth in the global economy and good news for commodities, so ultimately good news for the Canadian dollar.” US unemployment claims declined to their lowest in seven months but are still seen as to high to indicate a recovery. Boris Schlossberg of GFT said, “The (jobless claims) figure remains … above the 500,000 barrier and until it drops below that level the market will not be fully confident that the recovery has taken hold.”
Bank of Canada Officials Warn About ‘Loonie’s’ Appreciation
Despite skepticism in some quarters risk appetite rose across the board and put downward pressure on the greenback. Camilla Sutton of Scotia Capital Inc. stated, “Today we’ve had a reversal in sentiment across all markets as stronger GDP put risk into the market once again.” At their October 20th meeting Bank of Canada officials warned that the appreciation of the ‘loonie’ threatens Canadian economic recovery. The currency, which hit a four year low from March 9th through October 19th, has gained 27%.
The dollar advanced 0.9% against the Japanese yen trading at 91.41 after hitting session highs of 91.62.
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