Canadian Dollar Weakens On Disappointing GDP Data, Oil Prices Decline

06:22, 29th July 2016

(RTTNews) - The Canadian dollar was lower against most major currencies in early New York trading on Friday, as oil prices continued its free-fall and the nation's economy shrank more than expected in May, in the aftermath of wildfire in northern Alberta.

Data from Statistics Canada showed that the economy contracted 0.6 percent in May, the largest monthly decline since March 2009.

The decrease in May was mainly due to lower non-conventional oil extraction, a consequence of the Fort McMurray wildfire and evacuation.

This was worse than forecasts for a 0.5 percent decline and follows 0.1 percent gain in April.

Separate data showed that Canada industrial product price index rose 6 percent in June, primarily due to higher prices for energy and petroleum products.

Economists had been expecting the index to tick up to 0.1 percent. The index surged up by 1.1 percent in May.

Crude oil futures continued to fall toward $40 a barrel, extending steep weekly losses on speculation the global supply glut will worsen.

The Energy Information Administration on Wednesday reported that commercial crude oil inventories gained 1.7 million barrels in the week to July 22.

Crude for September delivery declined $0.37 to $40.77 per barrel.

The loonie has been trading in a negative territory against its major rivals, except the U.S. dollar, in the European session.

The loonie weakened to 1.4667 against the euro, a level unseen since June 6. The loonie is likely to locate support around the 1.48 zone.

Flash estimate from Eurostat showed that Eurozone consumer prices increased for the second straight month in July.

Consumer prices climbed 0.2 percent year-on-year, following a 0.1 percent rise in June. Prices were expected to rise again by 0.1 percent.

Retreating from an early 2-day high of 80.25 against the Japanese yen, the loonie declined to more than a 2-week low of 78.12. On the downside, the loonie may challenge support around the 76.00 mark.

The Bank of Japan raised the target for exchange-traded fund purchases, while holding its interest rate.

The bank will increase the purchases of exchange-traded funds so that their outstanding amount will rise at an annual pace of about JPY 6 trillion.

The loonie slid to a 2-day low of 0.9935 against the aussie, off its early 2-day high of 0.9859. If the loonie extends slide, 1.05 is likely seen as its next support level.

Data from the Reserve bank of Australia showed that Australia's private sector credit added 0.2 percent on month and 6.2 percent on year in June.

Housing credit gained 0.5 percent on month and 6.7 percent on year, while personal credit fell 0.1 percent on month and 0.8 percent on year and business credit fell 0.2 percent on month and climbed 6.6 percent on year.

On the flip side, the loonie spiked up to a weekly high of 1.3076 against the greenback, from a low of 1.3186 hit at 4:00 am ET. Further uptrend may see the loonie challenging resistance around the 1.29 region.

The initial estimate released by the Commerce Department showed that gross domestic product climbed by 1.2 percent in the second quarter following a downwardly revised 0.8 percent increase in the first quarter.

Economists had expected GDP to jump by 2.6 percent compared to the 1.1 percent growth that had been reported for the previous quarter.