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Canadian Dollar Strengthens as Economic Calendar Heats Up

H.S. Borji
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Canadian Dollar Strengthens as Economic Calendar Heats Up

The Canadian dollar strengthened Tuesday, taking advantage of a weaker US dollar amid a steady stream of economic data.

The loonie advanced 0.6 percent to 0.9180 US, the highest level in a month. The greenback suffered a broad sell-off Tuesday, with the US dollar index falling half a percent to 79.12. The US dollar was lower against the euro, British pound and Japanese yen.

The Canadian dollar advanced versus the euro, with the EURUSD pair falling 0.3 percent to 1.5161.

Canada’s international merchandise trade remained strong at the end of the fourth quarter, despite an unexpected drop in exports, Statistics Canada reported today from Ottawa. The country’s imports reached a record of $42.62 billion in March. Exports eased to $42.7 billion, as the trade surplus unexpectedly narrowed for the second time in three months.

Canadian exports declined 1.4 percent in March, the biggest decline since last October. Energy shipments plunged 7.9 percent, the first drop after three months. Imports rose 0.4 percent, led by advances in chemical, plastic and rubber products

Meanwhile, the trade surplus in the US narrowed from $4.88 billion to $3.75 billion in March, the Commerce Department reported today. Exports account for one-third of Canada’s gross domestic product. Three-quarters of all shipments go to the US.

Another release from the Richard Ivey School of Business showed Canadian business conditions remained elevated in April, a sign the economy was beginning to stabilize after a rocky winter. Ivey’s seasonally adjusted PMI reading eased from 55.2 to 54.1, narrowly exceeding estimates. The employment index advanced from 49.7 to 56.2, supporting the view the Canadian labour market was heating up at the start of spring.

The non-seasonally adjusted PMI index fell from 61.8 to 51.1, Ivey data showed.

The Canadian dollar faces an active week of trade, headlined by several market moving events. On Wednesday Statistics Canada will report on building permits for the month of March. Permits, which plunged at a double-digit rate in February, are expected to rebound.

On Thursday the Canadian Mortgage and Housing Corporation will report on April housing starts. The annualized reading is expected to show a sharp rebound from the previous month’s annual rate of 156,800. Statistics Canada will also report on house prices on Thursday. The new house price index is expected to have advanced 0.4 percent in March, following a gain of 0.2 percent.

Statistics Canada will close out the week with a report on employment. The Canadian labour market added 12,000 jobs in April, according to preliminary estimates. The unemployment rate is expected to have remained steady at the pre-recession low of 6.9 percent.

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