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Strong Data Lifts Canadian Dollar amid Geopolitical Concerns

H.S. Borji
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Strong Data Lifts Canadian Dollar amid Geopolitical Concerns

The Canadian dollar advanced against its US counterpart Friday, as strong consumer inflation and wholesale sales data outweighed geopolitical concerns in the Ukraine and Middle East.

The loonie, as Canada’s currency is called, advanced 0.2 percent to 0.9312 US. The loonie is on pace to break even this week after declining Tuesday.

The USDCAD pair tumbled 0.27 percent to 1.0733. The pair is trading above the 20-day average of 1.0727, where the bias is neutral. Initial support is found at 1.0736 and resistance at 1.0777.

The greenback strengthened earlier in the week following Fed Chair Janet Yellen’s Congressional testimony. Yellen said the economy would probably need accommodative policies for a while longer, but didn’t rule out an earlier than expected interest rate hike should the labour market continue to improve at a marked pace.

In economic data, Canadian inflation in June reached a more than two-year high, as consumer prices rose across a range of categories from food to energy.

Canada’s consumer price index increased at an annualized rate of 2.4 percent, marking the third consecutive month inflation levels were at or above the Bank of Canada’s 2 percent target.

So-called core inflation, which strips away volatile elements such as food and energy, increased at an annual rate of 1.8 percent, official data showed.
The CPI and core CPI rates both increased faster than forecast.

Food prices and shelter costs each rose 2.9 percent year-on-year, StatsCan reported. Transportation costs increased 2.2 percent annually, while gasoline prices increased 5.4 percent over the same period.

Separately, Canadian wholesale sales surged 2.2 percent in May, following a gain of 1.4 percent the previous month. Economists expected wholesale sales to have increased 0.6 percent.

The motor vehicle and parts subsector was responsible for most of the gains in May, advancing 9.8 percent to $9.3 billion.

Total wholesale sales volumes were up 2.2 percent in May.

The loonie’s gains came amid escalating geopolitical tensions in Eastern Europe after a Malaysian Airlines passenger plane was shot down over Ukraine, killing all 298 people on board.

Meanwhile, Israeli forces launched a ground offensive in Gaza, as the civilian death toll in the heavily populated strip continued to mount. The latest conflict has resulted in the death of more than 260 people. Twenty-seven Palestinians and one Israeli soldier have been killed after the ground operation was launched Thursday.
Commodity futures were mixed Friday, with precious and industrial metals declining. Crude prices moderated, as West Texas Intermediate fell 37 cents to $102.82 a barrel, while Brent crude advanced 19 cents to $108.08.

In other trading, the loonie surged against the Japanese yen, as the CADJPY climbed 0.42 percent to 94.38, the 50-day average. The pair faces initial support at 93.75 and resistance at 94.46.

The loonie edged higher against the euro, as the EURCAD tumbled 0.32 percent to 1.4510. The pair is supported at 1.4523. Initial resistance is likely found at 1.4578.

The loonie climbed against the British pound, as the GBPUSD tumbled 0.48 percent to 1.8315. The pair faces initial support at 1.8306 and resistance at 1.8432.

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