Loonie Falls Despite Government Data Surpassing Expectations

By TraderVox.com

Tradervox (Dublin) – The Canadian dollar has registered its greatest decline since November after dropping for the third straight week due to concerns in Europe. Greece political uncertainties and the risk of debt crisis contagion have overshadowed positive government report showing that inflation and factory sales increased more than expected. The pressure on commodity currencies continued for the third week; the trouble for the loonie started after election results in France and Greece.

The Canadian dollar has touched a four-month low against the greenback which has continued to rise. The greenback rose against all the major traded peers as the market seeks safe haven currencies. The market is expecting a report to be released next week to show that retail sales rose in March. According to Chief Strategist Dean Popplewell of Oanda Corp, an online currency trading firm in Toronto, despite the very positive Canadian metrics, the external headwinds are too great that commodity sensitive currencies are unable to shake off.

The positive data came after a last week report showed that Canadian payroll had  the largest two-month gain in thirty years. Report released today showed that the Retail Sales rose 0.3 percent in March after registering an unexpected drop in February. Jeremy Stretch who is the head of currency strategy in Canadian Imperial Bank of Commerce in London said that the USD/CAD pair will remained biased until the risk aversion in the market subsides. Analysts are still optimistic that Canada will be the first of the Group of Eight countries that will increase interest rates.

The Canadian dollar slid by 2.1 percent against the US dollar to trade at C$1.0222 from a May 11 high of C$1.0005 making it the largest decline since November 4. The turmoil in Europe has caused major risk aversion in the market forcing risk sensitive currencies to drop.

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