The loonie, as the Canadian dollar is best known, erased daily losses against its US counterpart after data showed initial jobless claims in the US rose last week, while the nations trade deficit unexpectedly widened in February. Meanwhile, loonies demand was supported after official data revealed the nations trade surplus widened to the highest level in two years.
USD/CAD hit a session high at 1.1037 at 12:55 GMT, after which the pair erased daily gains to trade at 1.1024, losing 0.1% for the day. Support was likely to be found at April 2nd low, 1.1004, while resistance was to be met at April 2nd high, 1.1047.
Initial jobless claims in the US rose by 16 000 to reach a five-week high of 326 000 in the week ended March 29, data by the US Labor Department showed today. Analysts had expected the number of American filing for jobless benefits will increase to 317 000, after a revised 310 000 applications in the previous week, the weakest since September 7.
The data indicated that the progress in the labor market still remains fragile.
Also fanning negative sentiment, the US trade deficit widened by 7.7% to $42.3 billion, the largest since September from $39.3 billion in the previous month, data by the US Commerce Department showed today. Analysts had predicted that the trade deficit will narrow to $38.5 billion. The increasing gap was led by declines in exports of fuels and capital goods, while imports remained steady.
“Trade is going to be a little bit of a drag for first-quarter growth,” said Guy Berger, a U.S. economist at RBS Securities in Stamford, Connecticut, who had forecast a widening of the gap, cited by Bloomberg. Beyond that, “factors favor a gradual narrowing of the trade deficit. Exports will increase as many of the emerging markets are still expanding, and while Europe is not doing great, it is growing. Imports will rise as the economy gets better.”
Meanwhile, loonies demand was supported after Statistics Canada reported the nation had a 0.29 billion Canadian dollars trade surplus in February, the largest since March 2012, exceeding analysts expectations for a gain to 0.2 billion. Januarys deficit was revised to 0.34 billion, almost double to what was reported earlier.
On Tuesday, the raw materials price index surged by 5.7% in February, the most in three years, after an upward revised 2.8% gain in the previous month and sharply exceeding analysts’ estimates of a 2.3% advance in February. On year-over-year basis, the RMPI rose at an annualized 3.9% rate in February, confounding experts’ forecasts for a 1% drop and after gaining 0.1% in the prior month.
The industrial product price index also advanced by 1% in February, exceeding analysts’ projections of a 0.7% gain and after adding 1.4% in January. On year-over-year basis, the IPPI surged by an annualized 1.8% rate in February, after rising 2.3% in the prior month.
The Canadian GDP grew 0.5% to an annualized 1.61 trillion Canadian dollars (approximately $1.46 trillion), offsetting a 0.5% drop in the previous month and beating analysts’ estimates for a 0.4% gain, a report by Statistics Canada showed on April 1.
The data suggested that the world’s 11th largest economy may be gaining momentum after the harsh winter that Bank of Canada Governor Stephen Poloz said was harming output.
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