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Canadian Dollar Extends Rebound amid Mixed US Data, Higher Oil Prices

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Canadian Dollar Extends Rebound amid Mixed US Data, Higher Oil Prices

Mixed US data and higher oil prices helped lift the Canadian dollar for the second consecutive day, extending its weekly gain against its US counterpart to 0.7 percent.

The Canadian dollar rose to an intraday high of 0.8223 US. It later consolidated at 0.9216, advancing 0.15 percent. The loonie is on pace for a weekly gain of 0.7 percent against the US dollar, which weakened across the board Thursday.

Higher oil prices helped lift the Canadian dollar Thursday, after a fresh wave of insurgency swept through Iraq and threatened to disrupt the supply of crude at a time when other major oil producers are already near capacity.

West Texas Intermediate, the US benchmark, advanced $1.49 to $105.89 a barrel. Brent crude, the global benchmark, was up $1.96 to $111.91 a barrel.

In economic data, the United States posted mixed figures today, which helped to undermine the greenback’s week-long offensive. US retail sales advanced 0.3 percent in May, half the rate of forecasts, the Commerce Department said today. Retail sales in April were revised up to 0.5 percent.

Retail receipts excluding automobiles edged up 0.1 percent, following a revised gain of 0.4 percent in April.

US business inventories in April accelerated at the sharpest pace in six months, adding further to the view the economy is rebounding strongly in the second quarter. Business inventories rose 0.6 percent in April, following a gain of 0.4 percent the prior month.

Growth is forecast to pick up sharply this quarter, according to early estimates of GDP. The US economy could rise 3 percent annually between April and June after contracting at an annualized rate of 1 percent in the first quarter.

In Canadian data, capacity utilization – a gauge of how fully factories are using their production capacity – rose slightly in the first quarter, advancing 0.3 percentage point to 82.5 percent. The rate in the first quarter was the highest in nearly seven years, Statistics Canada reported today.

Separately, new house prices advanced 0.2 percent in April, following identical increases in each of the previous two months, StatsCan confirmed today. Year-on-year, the price of new Canadian homes increased 1.6 percent.

The loonie is forecast to decline further this year, helping the Canadian economy to rebound, according to a new study by the Royal Bank of Canada. Heightened demand for Canadian exports, especially from the US, will help the Canadian economy expand 2.4 percent this year and 2.7 percent next year.

The Canadian dollar is forecast to drop to 0.85 US by the end of the year, the study concluded.

RBC also said the labour market will improve, leading to higher wages and a material boost in inflation. RBC forecasts core inflation to reach the Bank of Canada’s target of 2 percent by the second half of 2015.

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