June 17, 2020 / 8:06 PM / 22 days ago

CANADA FX DEBT-Canadian dollar dips as inflation miss supports BoC's easing stance

 (Adds details throughout; updates prices)
    * Canadian dollar falls 0.2% against the greenback
    * Canada's annual inflation rate falls 0.4% in May
    * Price of U.S. oil decreases 1.1%
    * Canadian bond yields trade mixed across a flatter curve

    By Fergal Smith
    TORONTO, June 17 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday as oil prices fell and
as domestic data showing a surprise annual decline in the
consumer price index supported expectations for continued low
interest rates.
    Canada's annual inflation rate fell by 0.4% in May, negative
for the second month in row, as the COVID-19 pandemic pushed
gasoline prices lower year-over-year, Statistics Canada said.
Analysts had forecast a flat rate in May.                 
    "Tame total and core CPI growth remain supportive of the
BoC's all-in policy stance," said Ryan Brecht, a senior
economist at Action Economics.
    Tiff Macklem, in his first public appearance as governor of
the Bank of Canada, said on Tuesday the bank remained focused on
using its policy tools, including low interest rates, to support
the Canadian economy's recovery from the COVID-19 pandemic.
            
    The Canadian dollar        was trading 0.2% lower at 1.3573
to the greenback, or 73.68 U.S. cents. The currency, which has
recovered from a two-week low on Monday at 1.3685, traded in a
range of 1.3512 to 1.3593.
    Canada risks slowing the pace of economic recovery as it
largely leans on repayable loans to help companies ride out the
coronavirus crisis, rather than grant programs that are favored
by the United States, economists say.             
    The Canadian government will unveil a "fiscal and economic
snapshot" on July 8 to show much money it has spent combating
the coronavirus outbreak, Prime Minister Justin Trudeau said.
             
    The price of oil, one of Canada's major exports, was
pressured by concerns over fuel demand due to fresh outbreaks of
COVID-19. U.S. crude oil futures        settled 1.1% lower at
$37.96 a barrel.             
    Canadian government bond yields were mixed across a flatter
curve, with the 10-year             down 1.2 basis points at
0.538%. On Monday, the 10-year yield hit a one-month low at
0.468%.

 (Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter
Cooney)
  
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