Canadian Dollar Falls As Inflation Fears Weigh
May 19 2021 - 05:10AM
RTTF2
The Canadian dollar erased its recent gains against its key
counterparts in the European session on Wednesday, as falling
commodity prices and weakness in equities offset optimism over
strong inflation data in April.
Data from Statistics Canada showed that Canada CPI rose 0.6
percent on a seasonally adjusted monthly basis in April, after a
gain of 0.1 percent in the previous month. Economists has expected
a 0.2 percent increase.
Core CPI, excluding food and energy, grew 0.8 percent from 0.1
percent last month.
The CPI rose 3.4 percent on year in April, up from a 2.2 percent
gain in March. This was the highest annual reading since May
2011.
European markets fell as mounting worries about inflation raised
speculation that central banks might be forced to tighten their
monetary policies sometime soon.
The loonie fell back to 1.4777 against the euro, its lowest
level since May 7. If the loonie slides further, 1.51 is possibly
seen as its next support level.
Data from Eurostat showed that Eurozone inflation accelerated,
as initially estimated to a two-year high in April, driven by
higher energy prices.
Inflation rose to 1.6 percent in April from 1.3 percent in
March. This was the highest rate since April 2019, when inflation
was 1.7 percent.
The loonie weakened to a 6-day low of 89.89 against the yen,
after a rise to 90.58 at 8:30 am ET. The loonie is seen finding
support around the 88.00 level.
The loonie declined to 0.9407 against the aussie, after touching
0.9335, its biggest level since November 3, 2020. Next key support
for the loonie is seen around the 0.96 area.
Data from the Australian Bureau of Statistics showed that
Australia wage price index rose a seasonally adjusted 0.6 percent
on quarter in the first three months of 2021. That exceeded
expectations for 0.5 percent and was unchanged from the three
months prior. On a yearly basis, the WPI advanced 1.5 percent -
beating forecasts for 1.4 percent, which would have been
unchanged.
The Canadian currency hit a 2-day low of 1.2102 against the
greenback, down from a high of 1.2054 seen at 8:30 am ET. On the
downside, 1.25 is possibly seen as its next support level.
Looking ahead, the Fed minutes from the April 27-28 meeting are
set for release at 2:00 pm ET.
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