US dollar managed to gain against its Canadian counterpart on Tuesday, following upbeat inflation data from the United States, but demand for the greenback was still pressured ahead of congressional testimony by FED Chairman Ben Bernanke.
USD/CAD bounced off session lows at 1.0401, recorded at 12:25 GMT, to reach 1.0434. Support was likely to be found at July 15th low, 1.0378, while resistance was to be encountered at July 11th high, 1.0470.
On Tuesday an official report said that consumer prices in the United States rose at the fastest pace in five months in June. This came as a signal that inflation was stabilizing and will be taken into account by FED policymakers, as market expectations of a near-term reduction of scale of Quantitative Easing by the US central bank were again present. Consumer Price Index (CPI) registered a 0.5% increase in June compared to May, exceeding initial estimates of a 0.3% rise. The index rose, supported mainly by the sharp jump in prices of gasoline, by 6.3% during June. Consumer prices in the United States has stabilized since the autumn of 2012, while the current moderate rate of inflation reflects the decreasing energy costs and a limited demand on the part of US consumers.
Additionally, industrial production in the country recorded a moderate rate of increase during June, as automobile and electronics production rose, which suggested that consumers might be willing to support economy. Industrial output rose by 0.3% in June on a monthly basis in line with projections, while Mays result has not been revised and remained at zero level. Manufacturing production, which is a major element of the overall industrial production, also increased by 0.3% during June. This data came in consonance with the report on Empire State manufacturing index, released on Monday, which showed business conditions in manufacturing sector improved. The index rose to a five-month high of 9.46 during July from 7.84 in June.
Meanwhile, it became clear that Canadian manufacturing shipments rose by 0.7% during May on a monthly basis, below the expected 1.0% increase, while in April shipments dropped by 2.1%, the largest decrease in almost four years, and a revision up from 2.4% previously. Manufacturing sales increased to 48.65 billion CAD. Shipments rose for a second time in the past six months in May, as manufacturing sector was still experiencing the effects of the weak domestic and foreign demand. This registered increase was favored mostly by higher activity in chemical industry, as shipments in that sector rose by 5.1% in May.
Elsewhere, Canadian dollar traded lower against the euro, as EUR/CAD pair advanced 0.45% to reach 1.3682.
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