Loonie Drops on Poor Retail Sales Data

Tradervox.com (Dublin) – The Canadian dollar dropped against the greenback for the second day after retail sales dropped in June more than the market had expected. This has ignited concerns that the Canadian economy experiencing difficulties in gaining momentum. However, the decline was limited as the Federal Open Market Committee meeting minutes showed that most members are willing to support additional stimulus to spur growth if information coming from the US does not indicate economic growth. The demand for safety drove commodity related currencies down as the yen held its gains.

David Doyle has indicated that the FOMC minutes report is having a great effect on the market right now which might spillover to Asia trading session. Doyle, who a Strategist at Macquarie Capital Markets in Toronto, also added that the market is likely to continue with this risk-on environment for the next one to two weeks. This will probably push the Canadian dollar up against the greenback. In a statement to the press, Mark Carney, the Bank of Canada Governor, reiterated that the higher borrowing cost maintained by the bank may be appropriate if domestic demand-driven expansion continues. The Canadian economy seems to weather the current global economic slowdown which is hampering economic growth in many countries.

Carney also expressed optimism in the economic growth rate, where he said that it is expected to accelerate through next year. He also noted that the economic momentum is in line with the potential output. Despite this optimism, a report from Statistic Canada showed that the Retail Sales dropped by 0.4 percent to reach C$38.7 billion. The report was against the market expectation of 0.1 gain, but is in line with other reports this month which has shown declines in wholesale sales, employment, and building permits. The consumer prices have also slowed in this month.

The Canadian dollar dropped by 0.2 percent against the US dollar to exchange at 99.14 cents per US dollar at the close of trading in Toronto. The currency had touched 98.43 cents yesterday, which is the strongest it has been since May 3.

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