Canadian dollar rebounds as business PMI accelerates
The Canadian dollar rebounded from a six-month low against its US counterpart Monday amid signs the Canadian economy was improving at the end of the third quarter.
The loonie, as the Canadian currency is known, advanced more than half a percent to 0.8937 US. The loonie had fallen below 89 US cents on Friday after the US Labor Department said nonfarm payrolls rose by 248,000 in September, as the unemployment rate fell to 5.9 percent. The latest US employment report has raised bets the Federal Reserve will consider lifting interest rates in the early part of 2015.
The USDCAD pair was trading at 1.1188. Initial support is likely found at 1.1174. The pair is likely to face resistance at 1.1293.
The US had no economic data to report on Monday.
In other trading, the loonie little changed against the euro, as the EURCAD consolidated at 1.4065. The pair faces initial support at 1.4036 and resistance at 1.4129.
The loonie tumbled against the Australian dollar, as the AUDCAD rose 0.13 percent to 0.9768. The pair faces initial support at 0.9711 and resistance at 0.9817.
The loonie extended its gains against the US dollar after Richard Ivey’s business index reached its highest level in 11 months, boosting optimism about the Canadian economy.
The Ivey purchasing managers’ index, a gauge of business conditions in Canada, rose to a seasonally adjusted 58.6 in September, up from 50.9 the previous month. Economists forecast an increase to 53.
The gauge of employment conditions improved after spending four months in contraction. The employment index rose 3.5 percentage points to 53, little changed from year-ago levels.
Statistics Canada will report on the national employment situation on Friday. Employers added 20,000 jobs in September as the unemployment rate held steady at 7 percent, according to forecasts.
The labour market has struggled with consistency all year, due in large part to a weak export sector. Employers subtracted 11,000 jobs in August, StatsCan reported last month. Compared to a year earlier, employment had increased only 0.5 percent, mostly in part-time jobs.
Canada’s economy showed signs of progress in the second quarter, as gross domestic product advanced 0.8 percent on the heels of stronger household spending and bigger export sales. Canadian exports rose 4.2 percent in the April to June period after posting a decline of 0.2 percent in the first quarter.
A weak local currency is expected to keep demand for Canadian exports elevated. The loonie is forecast to reach a low of 80 US cents next year, as the United States Federal Reserve begins to lift interest rates. That’s probably a good sign for the Canadian economy, which is operating below capacity. According to Bank of Canada Governor Steven Poloz, the economy will operate below its potential for the next two years, giving policymakers plenty of scope to maintain low interest rates.
Economic data could help the loonie recover in the week ahead. On Tuesday and Wednesday StatsCan will report on building permits and housing starts, respectively. Building permits are forecast to decline 2.5 percent in August, while housing starts are forecast to increase to a seasonally adjusted annual rate of 197,500.
Sorry. No data so far.