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Canadian dollar remains supported ahead of US data

H.S. Borji
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Canadian dollar remains supported ahead of US data

The Canadian dollar was on the upswing Monday, accelerating past the 0.93 US handle ahead of a slew US economic releases.

The loonie advanced 0.14 percent to 0.9311, easing from an intraday high of 0.9331.

The USDCAD pair was down 0.2 percent to 1.0733. Initial support is likely found at 1.0729 and resistance at 1.0808.

Canada has a quiet schedule this week. Statistics Canada on Friday will report on industrial product prices and raw material prices, the only notable events of the week.

In the United States, Monday features several market moving events.

The Federal Reserve Bank of Chicago’s national activity index rose from -0.15 to 0.21, indicating an expansion of economic growth for the month of May.

Markit Group will release manufacturing PMI later in the day. Economists forecast a monthly PMI reading of 56.5, little changed from the May reading. This suggests another robust month of activity for US manufacturers.

The National Association of Realtors will release data on previously-owned home sales today. The sale of previously owned homes is forecast to have increased 2.2 percent in May, following a 1.3 percent gain the prior month.

The US housing sector continues to struggle, according to recent data from the Commerce Department. US building permits declined 6.4 percent in May to a seasonally adjusted annual pace of 991,000, the Commerce Department reported last week. Housing starts declined 6.5 percent to a 1.001 million pace.

The Canadian dollar was supported Friday by stronger than forecast economic data. Canadian retail sales in April advanced at a rate of 1.1 percent, the fastest pace in 11 months, official data showed. Sales volumes – the component used to calculate real GDP – increased 0.8 percent.

Meanwhile, consumer prices rose at the fastest pace in more than two years, Statistics Canada said on Friday. Consumer inflation accelerated 2.3 percent annually, edging out forecasts calling for 2.1 percent.

So-called core inflation, which excludes volatile goods such as food and energy, increased 1.7 percent year-on-year.

Stronger than forecast inflation diminishes the chances of a further rate cut from the Bank of Canada, which has promised to lower the cost of borrowing further should the economy continue to struggle. The BOC downplayed a surge in consumer prices in April, saying it was due to temporary factors such as higher energy costs.

Energy costs have been on the rise amid escalating geopolitical tensions in eastern Europe and the fresh wave of violence in Iraq. While the Canadian dollar is generally sensitive to energy prices,, it is less likely to respond positively to the threat of supply constraints, which has been principal driver of the recent hike in oil prices.

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