USD/CAD Loonie Higher After Low US Inflation

The Canadian dollar bounced against a weaker greenback on Wednesday to its strongest level in about a week, bolstered by further gains in crude prices, better-than-forecast Canadian manufacturing data and an unexpected fall in U.S. inflation.

Factory sales rose for the third straight month in July, up 1.7 percent, as sales rose in the motor vehicle parts and assembly industries. This was stronger than the 1 percent increase economists had been forecasting. May and June sales data were also revised higher.

“The data flew under the radar, because everyone is waiting for the Fed. But I think it’s actually pretty decent overall,” said Greg Moore, senior currency strategist at RBC Capital

Markets, noting it was the latest in a string of respectable data that bucked fairly weak market expectations.

“(The data) again seems to have maybe reduced expectations that the Bank of Canada will in fact cut again before the end of the year.”

U.S. crude settled nearly 6 percent higher, following an unexpected decline in U.S. stockpiles. The loonie is typically sensitive to price moves in oil because of Canada’s position as a major exporter of the commodity.

Via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza