The Canadian dollar is joining its commodity currency peers and gains ground against the US dollar. USD/CAD is traded below 1.0850, extending a slide from nearly 1.10 that began earlier in the month.
Canadian data did not shine today, but the Bank of Canada seems optimistic.
Talking in a press conference regarding the Financial System Review report, BOC governor Stephen Poloz says that the US economy seems to be gathering momentum. Even though not all signs point in that direction (more on that below), US demand is critical for the Canadian economy. Poloz also said that Canada’s inflation trend remains low, but given the recent weakness of the loonie and the recent rise in inflation, markets ignored this comment.
US retail sales came out slightly below expectations, and the disappointment was only marginally trimmed down by positive revisions to April’s data. Also jobless claims rose instead of falling. While these shortfalls weren’t huge, they began a trend of USD selling, and the loonie certainly enjoyed it.
What about today’s Canadian data? It was OK, but nothing more than that. The capacity utilization rate rose to 82.5%, more than 82.4% expected, but the New Housing Price Index rose by 0.2% m/m, less than 0.3% expected.
Here is how the USD/CAD looks like:
For more, see the Canadian dollar prediction
