The Canadian dollar weakened slightly on Wednesday against its U.S. counterpart, nearing a one-month low it hit the previous day, as investors awaited U.S. economic data that could help guide the Federal Reserve’s interest rate decision next week.
The Fed is expected to cut interest rates by 25 basis points at the end of the month but investors are not sure how much additional easing to expect from the central bank through the rest of the year.
“I think it’s just a lot of wait-and-see until some of the U.S. data points later this week. We have the U.S. durable goods orders data tomorrow and the first look at the U.S. Q2 GDP on Friday,” said Erik Bregar, head of FX strategy at Exchange Bank of Canada.
The Bank of Canada has made clear that it has no intention of cutting interest rates. But recent strengthening of the Canadian dollar could ruin the central bank’s plan to sit out rate cuts by global peers.
At 3:14 p.m., the Canadian dollar was trading 0.1 per cent lower at 1.3145 to the greenback, or 76.07 U.S. cents. The currency, which notched on Monday its weakest intraday level in nearly one month at 1.3164, traded in a range of 1.3119 to 1.3151.
The loonie has lost some ground since hitting a near nine-month high on Friday at 1.3016, pressured by weaker-than-expected retail sales and wholesale trade data for May.
The price of oil, one of Canada’s major exports, fell 1 per cent on Wednesday, failing to draw lasting support from a large decrease in U.S. crude stockpiles as investors worried about global oil demand. U.S. crude oil futures settled 1.6 per cent lower at $55.88 a barrel.
Canadian government bond prices were higher across the yield curve, with the two-year up 6 cents to yield 1.428 per cent and the 10-year rising 43 cents to yield 1.452 per cent.
The 10-year yield touched its lowest intraday level since July 4 at 1.452, while the gap between Canada’s 10-year yield and its U.S. counterpart widened by 1.9 basis points to a spread of 59.6 basis points, the biggest gap since June 19.
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