The Canadian Dollar fell as dour economic data flowed into Canada this morning. Retail sales showed a larger than expected drop, printing -0.9 percent versus the -0.5 percent forecasted, while CPI read at 2.2 percent as analysts predicted. Although the inflation gauge remained above the Bank of Canada?s 2 percent target rate, recent market turbulence should prevent a hike at the central bank?s next meeting.
[B]Retail Sales Cool Down in June[/B]
Consumers took a shopping break in June following their big spending spree in May, Statistics Canada said Tuesday. Overall retail sales fell 0.9 per cent in June to an estimated $34.6 billion, following May’s advance of 2.6 per cent, which was the largest monthly sales increase in almost a decade.
[B]July Inflation Steady at 2.2%, As Forecast[/B]
Canada’s annual inflation rate held unchanged at 2.2 percent in July and the core rate fell to 2.3 percent from 2.5 percent in June, a steady performance that analysts said made early interest rate hikes unlikely. Statistics Canada said on Tuesday that lower energy prices countered the fact that a sales tax cut on July 1, 2006, dropped out of the annual inflation calculations. The tax cut had reduced inflation by an estimated 0.6 percentage points in July last year. Energy prices fell 0.4% on the month and 1.7% from July 2006.
[I]Source: Financial Post[/I]
[B]Crude Oil Little Changed After Hurricane Dean Misses Gulf Rigs[/B]
Crude oil was trading little changed amid forecasts Hurricane Dean would miss U.S. oil platforms and refineries in the Gulf of Mexico. Dean, now a “potentially catastrophic” storm, may enter the southern Gulf later today after battering Mexico’s Yucatan Peninsula, the U.S. National Hurricane Center said. Most U.S. production is in the northern Gulf. Mexico’s Cantarell field, the world?s third-largest, lies in the path of the storm.
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[I]Currency Markets: USDCAD[/I]
The Canadian Dollar fell as dour economic data flowed into Canada this morning. Retail sales showed a larger than expected drop, printing -0.9 percent versus the -0.5 percent forecasted, while CPI read at 2.2 percent as analysts predicted. Although the inflation gauge remained above the Bank of Canada?s 2 percent target rate, recent market turbulence should prevent a hike at the central bank?s next meeting. In addition, future bankers? acceptance rates are calling for a rate cut from the Bank of Canada, trading at 4.17 percent in December versus the 4.50 rate which the bank last set on July 10th. The Canadian dollar was last traded at 1.0589.
[I]Equity Markets: S&P/TSX Index[/I]
The Toronto Stock Exchanged opened with early morning gains, paced by precious metal producers and speculation of the Federal Reserve lowering its benchmark rate. Gold producers Barrick Gold Corp. increased 42 cents to C$33.93 and Goldcorp Inc. rose 22 cents to C$23.02 as gold prices remain elevated. The Financial sector rose 0.6 percent as investors speculated recent market conditions will prompt the Federal Reserve to cut the over night lending rate in September. Manulife Financial Corp gained 50 cents to C$39.79 and Toronto-Dominion Bank appreciated by 60 cents to C$67.90. The S&P/TSX was last quoted up 102.60 points to 13,212.94.
[I]Fixed Income Markets: Canadian Government 10-Year Bond[/I]
Government bonds continued to attract investors, lacking exposure to the risk of deteriorating credit markets. Despite signs of stabilization from the equity markets today, traders remain hesitant to invest in what has been in the past weeks a turbulent environment. Furthermore, weak economic data assured the Bank of Canada that a passive strategy may work best in the current market environment, sending yields lower. The Canadian government 10-year bond was last quoted at 97.220, yielding 4.35 percent.