C$ jumps a cent as US$ falls after data

April 14, 2015 Reuters

By Solarina Ho

CANADA FX DEBT-C$ jumps a cent as US$ falls after data

TORONTO, April 14 (Reuters) – The Canadian dollar on Tuesday rallied more than a cent against its U.S. counterpart as markets positioned themselves ahead of a Bank of Canada interest rate decision and as the greenback fell following a lower-than-expected rise in U.S. retail sales. U.S. data showed that while retail sales rebounded 0.9 percent last month, their largest gain in a year, they still came in below the 1 percent rise economists were forecasting.

“We didn’t get that (1 percent) … so we saw a lot of speculative positions bail out of their long U.S. dollar positions,” said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. Following the data, the U.S. dollar fell broadly against a basket of currencies. The currency is still expected to continue its rally and Wednesday’s declines were a good opportunity for market participants to buy some U.S. dollar at cheaper and more attractive levels. But Smith said the magnitude of the retail sales miss did not justify the size of the Canadian dollar’s move and said the markets were likely a little long U.S. dollar heading into the rate announcement. The Canadian dollar finished at C$1.2490 to the greenback, or 80.06 U.S. cents, stronger than the Bank of
Canada’s official close on Monday of C$1.2592, or 79.42 U.S. cents.

The Bank of Canada will announce its April decision and give its quarterly Monetary Policy Report on Wednesday. Markets are pricing in a low probability of a rate cut. While Smith is not expecting changes either, he added that following January’s completely unexpected 25-basis-point cut, “you can’t rule out anything.” With the price of U.S. crude stabilizing between $45 and $55 a barrel, Smith believes the Bank will be comfortable with its monetary policy for now. Oil is a major Canadian export. Higher oil prices also provided a boost for the loonie. Prices climbed on indications U.S. oil production was falling and on a weaker greenback. Tensions in Yemen, which some fear could destabilize neighboring Saudi Arabia, also added to analysts’ worries. U.S. crude prices were up 3.20 percent to $53.57 a barrel, while Brent crude added 1.74 percent to $58.94.

Canadian government bond prices were higher across the maturity curve, with the two-year price up 1 Canadian cent to yield 0.511 percent and the benchmark 10-year rising 31 Canadian cents to yield 1.321 percent. The Canada-U.S. two-year bond spread was -0.5, while the 10-year spread was -58.1.

Read the full article at: http://www.reuters.com/article/2015/04/14/markets-canada-currency-bonds-idUSL2N0XB2TR20150414