TORONTO (Reuters) - The Canadian dollar slipped against a broadly softer U.S. dollar and slumped against the euro on Tuesday after domestic growth data showed the economy ended the third quarter on a soft note.
Canada pulled out of recession in the third quarter, but a deep contraction in September gross domestic product suggested weakness could continue.
“The Canadian dollar fell hard on the GDP report,” said Adam Button, currency analyst at ForexLive in Montreal. “September was the drag in the quarter, and that will spill into October and November.”
The Canadian dollar CAD=D4 settled at C$1.3364 to the greenback, or 74.83 U.S. cents, slightly weaker than the Bank of Canada’s official close of C$1.3353, or 74.89 U.S. cents.
The U.S. dollar fell against a basket of major currencies .DXY after an industry report showed U.S. manufacturing contracted in November, falling to its lowest since June 2009.
Against the euro, the loonie hit its weakest in a week at C$1.4226. The euro was helped by record-low German unemployment data and euro zone manufacturing growth at a 19-month high.
The Canadian currency could see increased volatility this week, with Bank of Canada and European Central Bank policy decisions, commentary from Federal Reserve Chair Janet Yellen, and a meeting of major oil-producing countries all in the calendar.
Investors are expecting the Bank of Canada to hold rates steady on Wednesday, but the outlook described by Governor Stephen Poloz could still make a splash.
“Poloz and the Bank of Canada are habitually optimistic and that could lead to a one- or two-cent bounce,” Button said.
The currency’s strongest level of the session was C$1.3310, while its weakest was C$1.3398.
The Canadian dollar had earlier gained after a private survey showed that contraction in China’s factory activity slowed in October, supporting sentiment for commodity currencies.
Canadian government bond prices were higher across the maturity curve, with the two-year CA2YT=RR price up 6 Canadian cents to yield 0.600 percent and the benchmark 10-year CA10YT=RR rising 66 Canadian cents to yield 1.497 percent.
U.S. crude CLc1 prices settled up 20 cents at $41.85 a barrel, while Brent LCOc1 was down 34 cents at $44.27.
Additional reporting by Fergal Smith; Editing by Nick Zieminski and James Dalgleish