The Canadian dollar weakened to a nearly three-month low against its U.S. counterpart on Thursday as the greenback climbed broadly and Italy added to Canada’s uncertain trade outlook.
At 4 p.m. EDT (2000 GMT), the Canadian dollar was trading 0.8 per cent lower at $1.3092 to the greenback, or 76.38 U.S. cents, its biggest decline since March 13.
The currency touched its weakest since March 19 at $1.3110.
“It is mostly a (U.S.) dollar move,” said Erik Nelson, a currency strategist at Wells Fargo. “We saw a pretty sharp selloff in the euro.”
The U.S. dollar rose against a basket of major currencies after a signal by the European Central Bank that it would keep interest rates at record lows through the summer of 2019 weighed on the euro.
Gains for the greenback came as U.S. data showing the strongest rise in retail sales in six months supported expectations that the Federal Reserve would raise interest rates further. The Fed hiked rates on Wednesday.
The potential for the Bank of Canada to also hike, when it makes its next interest rate decision in July, has helped the loonie outperform against some other major currencies, Nelson said, but added “the trade picture remains a downside risk.”
The Canadian dollar notched its strongest level against the euro since June 5 at $1.5118.
Italy said it will not ratify the European Union’s free trade accord with Canada.
Canada is also contending with new U.S. tariffs on steel and aluminum imports as well as slow-moving talks to modernize the North American Free Trade Agreement, known as NAFTA.
Canada agreed with the United States that talks to update NAFTA should continue although they did not set a date for the next round, Canadian Foreign Minister Chrystia Freeland said in remarks casting further doubt on the chances of a deal this year.
The ratio of Canadian debt to disposable income slipped in the first quarter to a two-year low of 168.0 per cent from 169.7 per cent in the fourth quarter as disposable income grew, Statistics Canada said.
U.S. crude oil futures settled 0.4 per cent higher as a key supply-setting meeting of the Organization of the Petroleum Exporting Countries loomed. Oil is one of Canada’s major exports.
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries and German Bunds. The benchmark 10-year rose 29 Canadian cents to yield 2.284 per cent.