A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto in this January 23, 2015, file photo. The Canadian dollar pared earlier session losses against its U.S. counterpart on Tuesday, strengthening after data showed January growth was better than feared. REUTERS/Mark Blinch/FilesMARK BLINCH/Reuters
The Canadian dollar closed at 75.79 cents (U.S.), up 0.44 cents (U.S.) from Wednesday's close of 75.35 cents (U.S).
The loonie was propped up by better-than-expected trade data. Statistics Canada said Thursday Canada's merchandise trade deficit with the world narrowed from $811 million in June to $593 million in July. According to Thomson Reuters, economists had been expecting a deficit of $1.3 billion for July. "There's no two ways about it, this is a solid report," wrote Benjamin Reitzes, senior economist at BMO Capital Markets, in a research note. "It looks like better U.S. growth and the weaker Canadian dollar might finally be providing a boost to trade."
Higher oil prices were also supporting the Canadian dollar. West Texas Intermediate (WTI) crude closed up 50 cents (U.S.) at $46.75 (U.S). Oil has rallied for two days after loosing a spectacular 7.7 per cent or $3.79 (U.S.) on Tuesday.
The euro was weak against the Canadian dollar after the European Central Bank decision on Thursday to hold rates at a low 0.05 per cent. On Thursday, the Euro closed at $1.47 Canadian.
The next two weeks are key for the Canadian dollar. The Bank of Canada makes its interest rate decision on Wednesday, September 9. The U.S. Federal Reserve will make its highly anticipated interest rate announcement the following week. It would mean more volatility in currency markets if either central banks change their target rate.
On Friday Statistics Canada will release the labour force survey for August at 8:30 am. The U.S. nonfarm payrolls report will also be released at the same time.
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