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Canadian Dollar Declines Following Mixed data, BOC Business Outlook

H.S. Borji
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Canadian Dollar Declines Following Mixed data, BOC Business Outlook

The Canadian dollar declined Monday amid mixed economic data and a timid Bank of Canada quarterly outlook that suggested firms expect slower sales growth and weak inflation.

The loonie, as Canada’s currency is called, fell from an intraday high of 0.9406 US to settle at 0.9374 US, declining 0.14 percent from the previous close.

The USDCAD pair advanced 0.14 percent to 1.0667. The pair, which has gained around 0.3 percent since July 2, is testing the initial resistance at 1.0667. On the downside, the pair is likely supported at 1.0632.

The Canadian dollar declined sharply against the Japanese yen. The CADJPY pair fell 0.32 percent to 95.48. The pair is testing the initial support at 95.49. Initial resistance is likely found at 96.05.

Monday kick-started an active week for the loonie, headlined by housing and employment figures.

In economic data, Canadian building permits in May advanced at the fastest pace since July 2013, Statistics Canada reported today in Ottawa. The value of building permits rose 13.8 percent in May, compared to a 2.2 percent gain the previous month.

The Richard Ivey School of Business said Canadian business conditions in June fell to the lowest level in six months. The Ivey purchasing managers’ index unexpectedly declined from 48.2 to 46.9. Economists forecast a gain to 52.5.
A reading above 50.0 is a sign of expansion in business activity, whereas a figure below that level signifies contraction.

In a separate report the Bank of Canada said the business outlook was timid in the second quarter, as firms indicated they expect slower sales growth and low inflation. Despite the drop-off in enthusiasm, the BOC said the underlying trends were still encouraging, as firms were generally optimistic about stronger domestic and international demand.

“The summer Business Outlook Survey continues to offer some encouraging signs for the economic outlook, although lingering uncertainty amid intense competition still hinders the pace of growth,” the BOC said in its quarterly report, which was based on 100 surveys conducted between May 20 and June 12.

Canada’s economy is recovering from a broad weather-induced slowdown in the first quarter that weighed on household consumption, business spending and consumer spending. Canada’s gross domestic product increased only 0.3 percent on the quarter and 1.2 percent annually.

On Wednesday the Canadian Mortgage and Housing Corporation will report on housing starts for the month of June. The seasonally adjusted annual rate for groundbreaking is forecast to have declined sharply.

Statistics Canada will report on new house prices Thursday.

On Friday StatsCan will report on the employment situation for June. Canadian employers are forecast to have added more than 26,000 jobs in the final month of Q2, following a gain of 25,800 the previous month. The unemployment rate is forecast to remain unchanged at 7 percent.

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