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Loonie Loses Ground ahead of Retail Sales, CPI

H.S. Borji
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Loonie Loses Ground ahead of Retail Sales, CPI

The Canadian dollar declined for a third consecutive day against its US counterpart, as a lack of Canadian data kept the greenback elevated ahead of retail sales and inflation reports in the latter half of the week.

The loonie fell to an intraday low of 0.9139 US, extending its losses from the previous session that resulted from a weak wholesale sales report. Canadian wholesale sales declined 0.4 percent in March, following a gain of 1.1 percent the prior month, Statistics Canada reported Tuesday. Economists forecast a gain of 0.4 percent.

In the North American session the loonie had consolidated at 0.9147, dropping 0.24 percent. The Canadian currency’s biggest test comes in the latter half of the week, as StatsCan gets set to report on March retail sales and April consumer inflation.

Economists say retail sales probably increased 0.3 percent in March, following a gain of 0.5 percent the prior month that was led by higher receipts at furnishing stores, health & personal care stores and clothing stores.

Excluding automobiles, retail sales are expected to have advanced 0.4 percent in March, following a growth rate of 0.6 percent in February.

On consumer price inflation, StatsCan is expected to show modest improvement in April. Economists say consumer prices probably increased 0.3 percent at the start of the second quarter, half the rate of the previous month. Year-on-year, consumer prices advanced 2 percent, following an annualized gain of 1.5 percent, according to forecasts.

The so-called core measure, which excludes volatile prices tied to things like food and gasoline, increased 0.2 percent over the previous month and 1.4 percent year-on-year, economists say.

The Canadian dollar has enjoyed positive momentum in recent weeks, as broad improvements in the domestic economy and a declining US dollar kept the loonie elevated. The loonie earlier this month reached 92 US cents for the first time since the beginning of the year, as the markets disregarded stronger than forecast US jobs data amid signs the Federal Reserve would maintain record-low interest rates for the foreseeable future.

The loonie may decelerate further in the Wednesday session should the minutes of the April 29-30 Federal Reserve policy meetings reveal bullishness on the part of policymakers. The US central bank pared asset purchasing by another $10 billion last month, disregarding the first quarter’s weak GDP reading. This suggests Fed officials are confident about the economy’s growth pace in 2014, sentiment shared by Chair Janet Yellen in her May 7 testimony to the Joint Economic Committee.

The US dollar index, a weighted average of the greenback’s performance versus six major peers, was at 80.18 ahead of the release of the Fed minutes. This represents a gain of 0.17 percent. The index has risen more than 0.2 percent over the past five days. The US dollar faces an active latter half of the week, headlined by home sales and manufacturing PMI.

Sales of existing and new US homes are expected to have rebounded sharply in April, according to estimates.

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