Loonie remains steady as trade surplus shrinks
Wednesday 5 April, 2023
Daily Currency UpdateThe Canadian dollar remains stable, relative to the U.S. dollar, trading in the 1.34270 - 1.34830 range. The latest data release shows a low trade surplus in Canada for February which resulted in the CAD losing its gains from the past few days. Canada's trade surplus fell to $422 million in February, from a revised figure of $1.2 billion in January, due to declines in both imports and exports. This data comes in lower than the projected surplus of $1.8 billion anticipated by analysts. Oil prices remained steady at roughly $80.70 per barrel. The markets continue to evaluate the bleak economic outlook in contrast to the projected reduction in U.S. crude oil inventories and plants by the Organization of Petroleum Exporting Countries producers to cut output.
Key MoversThe greenback failed to push above the 101.75 mark and has retreated to the 101.50 region, its lowest level in two months. Data released today by Automatic Data Processing showed private sector employment in the US increased by 145,000 in March, which is lower than the market's anticipated 200,000. However, there was some positive news with February’s figure of 242,000 jobs, which was revised upwards to 261,000. The services Purchasing Manager’s Index (PMI) came in up, at 52.6 compared to the previous month's 50.6. The US Institute of Supply Chain Management’s manufacturing PMI came in lower at 51.2 down from 55.1 last month, indicating a contraction in factory activity. Financial markets are now indicating that interest rates will remain unchanged in May, with cuts expected to follow shortly thereafter.
EUR/USD is gaining momentum and rose above 1.0950 today. The currency pair continues to see positive support due to the persistent strength of the euro alongside a weak US dollar. Investors are factoring in an eventual narrowing of interest rate differentials between the two currencies as inflation continues to remain high in the eurozone the European Central Bank (ECB) remains on course to hike rates again. Data released today showed faster growth in the eurozone with the services PMI data coming in at 55.0 in March, up from the previous month's 52.7.
The pound is trading between the 1.25 and 1.2470 levels. The ongoing weakness of the USD is lending positive support for this pair. Composite and services PMI data for the UK in March fell slightly, however, all signs still point to an expansion in this sector. Composite PMI came in as expected at 52.2, down from the previous month's reading of 53.1. Services PMI was down to 52.9, following the previous month's 53.5. With this data coming in slightly better than expected, the market is anticipating more interest rate hikes from the Bank of England following the May 11 meeting.
- EUR/CAD: 1.4704 - 1.4767 ▼
- GBP/CAD: 1.677 - 1.6831 ▼
- AUD/CAD: 0.9 - 0.9093 ▼
- USD/CAD: 1.3428 - 1.3481 ▼