The outlook for the Canadian dollar remains decidedly negative following a worse-than-expected GDP reading from Canada.

Official statistics show growth slumped by 0.2% in the second quarter of 2015 - analysts had expected the economy to grow by 0.1%.

The Canadian dollar exchange rate complex (CAD) was understandably lower on the news:

The pound to Canadian dollar exchange rate = 2.0360.

The euro to Canadian dollar exchange rate = 1.4437.

The US to Canadian dollar exchange rate = 1.3030.

Reactions to Canada’s Growth Disappointment

Matthieu Arseneau, Senior Economist at National Bank :

“Still no growth in Canada this year, disheartening news that leaves the loonie poised to make a run at fresh decade-plus lows. Canada’s economy unexpectedly contracted 0.2 percent in May versus forecasts of a flat reading. The loonie managed to gain on the news as disappointing data on U.S. wage growth overshadowed and weakened the big dollar.”

Joe Manimbo at Western Union:

“Still no growth in Canada this year, disheartening news that leaves the loonie poised to make a run at fresh decade-plus lows. Canada’s economy unexpectedly contracted 0.2 percent in May versus forecasts of a flat reading. The loonie managed to gain on the news as disappointing data on U.S. wage growth overshadowed and weakened the big dollar.”

Paul Ferley, Assistant Chief Economist, RBC Economics:

“Looking forward, the Bank of Canada is forecasting a return to positive growth during the second half of 2015, with growth averaging around 2% premised in large part on exporters starting to provide greater offset to the weakness in the energy sector.

“Our forecast assumes that this offset will materialize, which will result in policy remaining on hold for the remainder of 2015. If the economic weakness persists into the second half of the year, further accommodation would likely be undertaken.”

Outlook for the Commodity Dollar Bloc

Employment reports will dominate proceedings and TD Securities tell us they are looking for downside risks for July Aussie employment, in-line New Zealand Q2 employment, and upside risks for Canada, at least relative to early consensus.

“We look for a 15k gain in July, rebounding from the 6k loss in June. Rather than reflecting any optimism, we think the issue could be seasonal factors in the temporary hiring in the service producing sector, as well as the Pan Am games,” says Richard Kelly, Head of Global Strategy at TD Securities in London.

Kelly continues to be uneasy about full-time hiring being ripe for a correction lower, though, so upside in employment should likely be seen as an entry point for positioning for a greater likelihood for a further Bank of Canada rate cut.