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Strong Housing Data, Rising Oil Prices Lift Canadian Dollar

H.S. Borji
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The Canadian dollar was trading higher on Monday, surpassing 80 cents US amid stronger than forecast housing data and rising energy prices.

The loonie, as the Canadian dollar is known, advanced to 0.8033 cents US. The USDCAD exchange rate declined nearly 0.6 percent to 1.2451. The pair faces initial support at 1.2417 and resistance at 1.2589.

The US dollar was weaker across the board Monday. The US dollar index, which tracks the greenback’s performance against a basket of six currencies, declined 0.21 percent to 94.50.

In economic data, Canadian housing starts rose faster than forecast in January, a sign housing demand remains elevated despite a slowing economy.

Housing starts in Canada rose to a seasonally adjusted annual rate of 187,276 in January, up from 179,637 in December, the Canadian Mortgage and Housing Corporation reported today in Ottawa. Economists forecast housing starts to fall to a seasonally adjusted annual rate of 177,500. The increase was led by multiple urban starts, which advanced to 115,008 in January, up from 102,384 the previous month. Single-detached urban starts decreased to 57,314 units from 59,556 units.

Said CMHC chief economist Bob Dugan, “The trend in total housing starts has been moderating since September 2014, reflecting lower trends in both multiple and single-detached starts. Overall, economic and demographic factors remain supportive of housing demand. The moderation in new home construction reflects inventory management by builders and is in line with CMHC’s expectations.”

Last week Statistics Canada said building permits rose faster than forecast in December on growth in non-residential construction intentions. Residential building permits showed no growth, official data showed.

In commodities trading, oil prices advanced for a third consecutive day on Monday, raising optimism Canada’s biggest export would receive a lift after a seven-month rout.

US crude for March delivery rose more than $1 to $52.72 a barrel. International benchmark Brent crude rose 63 cents to $58.43 a barrel.

Collapsing oil prices have driven the commodity-sensitive loonie to multi-year lows in recent months. The price of crude rebounded last week, but remained susceptible to a sharp pullback after the Energy Information Administration said US crude stockpiles rose to the highest level since 1930. US crude production is expected to remain elevated until at least midyear, which suggests investors may still be searching for a price bottom.

Higher oil prices eroded ten consecutive weekly gains for the USDCAD. The pair declined more than 1 percent last week, despite a solid rebound on Friday following bigger than expected nonfarm payroll gains. US employers added 257,000 private payrolls in January, the twelfth consecutive month the economy created more than 200,000 jobs. Job gains were revised up by nearly 150,000 in November and December combined, bringing the three-month total to more than 1 million.

Statistics Canada also reported bigger payroll gains in January. The Canadian economy added 35,400 jobs in January, as the unemployment rate declined to 6.6 percent from 6.7 percent.

 

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