Loonie Declines to Six Month Low on Growth Reports

By TraderVox.com

Tradervox (Dublin) -Gloomy growth data from Canada resulted to loonie declining to its lowest in six months against the greenback as speculation bank of Canada will delay to increase interest rate gripped the market. Data from the country showed retail sales dropped while mortgage terms were tightened for the third round. The drop also came as US economic reports showed weaker economy while reports from China are expected to show Manufacturing shrank for the eight month. However, the Bank of Canada Governor Mark Carney indicated that he may still increase the interest rate as the economy has improved towards full output.

Speaking in Halifax, Nova Scotia, the BOC governor said that the economic expansion has continued and the current excess supply would be absorbed gradually hence enabling the bank to make modest withdrawal from the current monetary policy. The Canadian economy is the tenth largest in the world and grew by 1.9 percent annualized pace for the first three months of the year. In the same period, the household debt to disposable income ratio rose to the highest. The retail sales dropped in April to 0.5 percent after gaining 0.4 percent in the previous month. In an attempt to avoid household debt crisis, Canadian Finance Minister indicated that he would tighten mortgage terms.

The Canadian dollar also decreased as report from China showed that the country’s manufacturing dropped for the eight month reducing demand for commodity related currencies. Preliminary reading for the Chinese Purchasing Managers’ Index showed 48.1 reading for June which indicates a contraction in the economy. A reading above 50 indicates an expansion in the economy. US data showed a decrease in jobless claims to 387,000 according to labor department figures released today.

The Canadian dollar dropped 1.12 percent against the dollar to trade at C$1.0297, which is the biggest decline since December 12.

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