USD/CAD falls to session lows after US manufacturing, industrial production reports

US dollar fell to daily lows against its Canadian counterpart on Friday, as the New York index of manufacturing plunged into negative territory this month and US industrial production contracted in October, while the loonie received a boost after Federal Reserve Chair-nominee Janet Yellen indicated that monetary stimulus will remain in place until signs of improvement in US economy appear.

USD/CAD slid to a session low at 1.0452 at 13:45 GMT, after which consolidation followed at 1.0470, ticking up 0.03% for the day. Support was likely to be received at November 7th low, 1.0406, while resistance was to be met at November 14th high, 1.0526.

According to a survey by the Federal Reserve Bank for New York, manufacturers in the region said that business conditions deteriorated in November, as new orders and shipments decreased. The index, gauging activity in manufacturing, dropped to a reading of -2.21 in November, marking its first negative value since May. In October the index came in at 1.52. Values below zero are usually considered as an indication that activity in the sector has contracted. Preliminary estimates pointed an increase to 5.00. The sub-index of new orders plunged to -5.53 in November from a reading of 7.75 in October. The gauge for shipments fell to -0.53 this month from a value of 13.12 a month ago. Labor market conditions in the region probably worsened, as the sub-index of employment dropped to 0.00 in November from 3.61 in the preceding month.

At the same time, the index of import prices declined 0.7% in October compared to a month ago, after a revised down 0.1% uptick in September. Experts had anticipated that the index will fall less, by 0.5% in October. In annual terms, import prices in the United States decreased 2.0% in October, after another 1.0% drop in September.

In addition, industrial output in the United States unexpectedly decreased 0.1% in October compared to September, marking its first monthly drop since July, as sectors of mining and utility services contracted. Expectations pointed a 0.2% expansion in production during October. US mining sector shrank 1.6% in October, following six consecutive months of gains. Manufacturing output, a major component of the overall industrial output, climbed 0.3% in October, which marked a third consecutive monthly gain. The rate of capacity utilization slowed down to 78.1% in October from 78.3% in September, while projections pointed a rate of 78.2% in October.

Meanwhile, Canadian dollar recovered from a two-month low, recorded on Thursday, after Janet Yellen said during her testimony that Feds monetary stimulus, which pressures longer-term interest rates, will remain in place, as this bolstered demand for riskier currencies, such as the loonie, the kiwi and the Aussie.

“The market is still kind of digesting the Yellen comments and it certainly seemed to be low for longer,” said Don Mikolich, executive director of foreign exchange sales at Canadian Imperial Bank of Commerce, by phone from Toronto, cited by Bloomberg News. “If the economy in the states needs more stimulus, it’s not going to be a great feed-through in to the Canadian economy, so I think there’s limits to how far we’ll see the Canadian dollar strengthen.”

Canadian manufacturing shipments rose 0.6% in September on a monthly basis, after they remained flat in August, while analysts had projected a 0.5% increase in September.

Elsewhere, the loonie was lower against the euro, with EUR/CAD cross rising 0.33% on a daily basis to trade at 1.4136 at 14:45 GMT. GBP/CAD pair was also advancing, up 0.39% for the day to trade at 1.6883 at 14:47 GMT.