US dollar entered negative territory against its Canadian counterpart on Wednesday, following the release of downbeat US and Canadian trade balance reports, while expectations that the Federal Reserve Bank will begin trimming its asset purchases in September were still providing support for the greenback.
USD/CAD reached a session low at 1.0477 at 10:30 GMT, also the pairs lowest point since August 28th, after which consolidation followed at 1.0499, retreating 0.35% on a daily basis. Support was expected at August 21st low, 1.0396, while resistance was to be met at September 3rd high, 1.0560.
Earlier today an official report said that US trade deficit widened more than projected to 39 147 billion USD (13.3% increase) in July, following the deficit figure of 34 543 billion USD in June. Experts had anticipated a lesser deficit at the amount of 38 600 billion USD. This data was published, as investors continued to speculate over the possible timing of the Federal Reserves expected reduction in monthly asset purchases, after data on Tuesday pointed that manufacturing activity in the United States rose at the fastest pace since April 2011 in the month of August.
Meanwhile, Bank of Canada introduced no changes in its monetary policy today, leaving the benchmark interest rate unchanged at the level of 1.00% in line with expectations, as uncertainty over global recovery decelerated the projected increase in export and business investments. Bank officials said that Canadian economy has slowed down significantly and inflation rate remained suppressed. The base interest rate has been at 1.00% since September 2010.
In addition, Canadian trade balance registered a deficit almost five times larger than anticipated in July, with import figure decreasing due to weaker demand for precious metals and airplanes. Trade deficit widened to 0.931 billion CAD during July, while analysts from Bank of Canada had expected a deficit at the amount of 0.250 billion CAD.
Elsewhere, the loonie, as Canadian dollar is also known, was higher against the euro, with EUR/CAD cross slipping 0.28% to trade at 1.3837.
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