The Canadian dollar closed lower Thursday following a warning that the federal government may need to downgrade its growth projections for the Canadian economy when it releases its mid-year budget update.
The loonie was down 0.72 of a cent at $1.0153 (U.S.) after running up nearly a full cent a day earlier.
Finance Minister Jim Flaherty told reporters before tabling his budget implementation bill that Canada’s economy is holding up reasonably well, but is not immune to gathering headwinds from around the world.
The latest comments come on the heels of a new report by the Macdonald-Laurier Institute warning that some provinces — particularly Ontario and Alberta — are headed to a European-style crisis in the next 10 to 30 years if their policies do not change.
Commodity prices failed to find lift from positive Chinese data as the November crude contract on the New York Mercantile Exchange declined 2 cents to $92.10 a barrel.
The latest Chinese data indicated the slowdown in the world’s second-biggest economy is bottoming out, while financially troubled Spain conducted a successful bond auction as European Union leaders gathered for a two-day meeting.
China said its economy grew 7.4 per cent from the year before in the three months ended in September, which was in line with economists’ expectations. That was slower than the second quarter’s 7.6 per cent growth but economists also pointed to quarter-on-quarter growth of 2.2 per cent, the biggest such gain in a year.
While indicating that the world’s second-biggest economy is recovering, analysts said the showing also indicated that there is no need for the government in Beijing to inject further stimulus.
December copper was off 1 cent at $3.74 a pound following a five cent run-up Wednesday, while December gold pulled back $8.30 to $1,744.70 an ounce.
Meanwhile, an EU summit starting Thursday will see leaders debate tightening financial integration and creating a banking union as well as dealing with the financial needs of Greece and Spain.
But long-term proposals for overhauling the EU appear likely to play a leading role at this week’s summit, with firm decisions not expected on more immediate matters.
Ahead of the meeting, German Chancellor Angela Merkel endorsed a proposal for a top European Union official to be given the power to veto member governments’ budgets in a bid to keep European countries from overspending in the future.
The euro zone financial crisis has focused on Spain in recent months. There are growing expectations the country, suffering heavily from the after-effects of a building boom that went bust, will soon make a request for international help to deal with its finances.
Amid that expectation, Spain on Thursday raised €4.6-billion ($6-billion) at a sharply lower cost. The Treasury sold €1.51-billion in 10-year bonds at an average interest rate of 5.46 per cent, down from 5.66 per cent in the last such auction Sept. 20.
Spain says it will soon decide whether to look to tap a European Central Bank bond-buying program largely designed to keep a lid on its borrowing costs.