The Canadian dollar closed lower Wednesday as the Bank of Canada kept its key interest rate unchanged at 1 per cent.The loonie ended down 0.24 of a cent at 91.42 cents (U.S.) as the central bank signalled it is in no rush to raise rates from that level, where it’s been since September, 2010, as the global economy continues its slow recovery.
“The Canadian dollar fell lower on the Bank of Canada continuing to harp a tone of we’re still nowhere close to raising interest rates,” said Rahim Madhavji at Knightsbridge Foreign Exchange.
“It seems that the Bank of Canada is quite content with the lower Canadian dollar boosting exports and assisting with inflation.”
Traders also digested data that showed Canada’s trade balance slipped into deficit territory during April. Statistics Canada said Canada’s merchandise exports declined 1.8 per cent while imports increased 1.4 per cent, taking Canada’s trade balance with the world from a surplus of $766-million (Canadian) in March to a deficit of $638-million.
In addition, traders are also awaiting an announcement on possible stimulus measures aimed at helping the euro zone recovery and the release of U.S. and Canadian jobs numbers coming out at the end of the week.
Markets are counting on European Central Bank president Mario Draghi to announce measures Thursday that will give a lift to the euro zone’s weak recovery and save the region from falling into a deflationary spiral that would choke off growth.
Worries about deflation increased Tuesday in the wake of data showing that inflation in the euro zone came in at 0.5 per cent in May, down from 0.7 per cent in April. The latest data also showed that gross domestic product in the euro zone grew by a paltry annualized rate of 0.2 per cent in the first quarter.
Analysts are looking at a variety of options for the ECB, including an interest rate cut or a form of quantitative easing.
On Friday, traders will see if there will be a strong reading from the U.S. non-farm payrolls report. Economists forecast that about 219,000 jobs were created during May following a much stronger-than-expected 288,000 gain in April.
Ahead of that report, payroll firm ADP reported Wednesday that the U.S. private sector created 179,000 jobs last month.
Canadian job figures for May also come out Friday and economists expect about 21,000 jobs were created after the economy shed 29,000 the previous month.
On the commodity markets, the July crude contract on the New York Mercantile Exchange slipped 2 cents to $102.64 (U.S.) a barrel.
August bullion faded 20 cents to $1,244.30 an ounce and July copper fell 4 cents to $3.09 a pound.Report Typo/Error