Forexpros – The Canadian dollar slid lower against its U.S. counterpart on Friday, as disappointing data from China and ongoing concerns over the debt crisis in the euro zone weighed on demand for higher-yielding assets.
USD/CAD hit 1.0051 on Wednesday, the pair’s highest since January 31; the pair subsequently consolidated at 0.9994 by close of trade on Friday, gaining 0.25% over the week.
The pair is likely to find support at 0.9926, Friday’s low and resistance at 1.0051, Wednesday’s high and a two-and-a-half month high.
Market sentiment was undermined after official data on Friday showed that the Chinese economy grew at the slowest pace in almost three years in the first quarter, fuelling concerns over a slowdown in global growth.
China’s gross domestic product grew by 8.1% in the three months to March, disappointing expectations for an 8.3% increase, after recording an expansion of 8.9% in the fourth quarter.
The weak data underlined concerns over the outlook for the world’s second largest economy after government data earlier in the week showed that Chinese imports declined sharply in March.
Meanwhile, concerns over rising Spanish borrowing costs mounted, amid fears that the country’s banks are too dependent on the European Central Bank.
In addition, a member of the ECB’s governing council said that markets were overreacting to concerns about Spain and added that the bank had no reason to resume its bond purchase program to ease pressure on the country’s borrowing costs.
In the U.S., data on Friday showed that consumer sentiment fell in April as rising fuel costs weighed.
The data came one day after official data showed that U.S. weekly initial jobless claims rose to 380,000, defying expectations for a decline to 355,000.
Also Thursday, a report showed that Canadian housing starts rose unexpectedly in March, improving for the second consecutive month.
The Canada Mortgage and Housing Corporation said that the seasonally adjusted annual rate of housing starts rose to 216,000 units in March from an upwardly revised 205,000 units in February.
Analysts had expected Canadian housing starts to dip to 200,000 units in March.
In the week ahead, investors will be looking at Monday’s U.S. data on retail sales, amid concerns that high fuel costs will hit consumer spending. Market participants will also be closely watching the Bank of Canada’s rate statement, following its monetary policy meeting on Tuesday.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, April 16
Canada is to produce official data on foreign securities purchases, which is closely linked to currency demand.
The U.S. is to release government data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. The country is also to release a report on manufacturing activity in New York, as well as government data on net long-term securities transactions and business inventories.
Tuesday, April 17
The BoC is to announce its benchmark interest rate and release its rate statement. In addition, Canada is to publish government data on manufacturing sales, a leading indicator of economic health.
The U.S. is to produce government data on building permits, an excellent gauge of future construction activity, as well as data on housing starts. The country is also to release official data on industrial production and the capacity utilization rate, leading indicators of economic strength.
Wednesday, April 18
The BoC is to release its monetary policy report, followed by a press conference to discuss the bank’s interest rate decision on Tuesday.
Later Wednesday, the U.S. is to produce government data on crude oil stockpiles. This data can be a big market mover for the Canadian dollar due to the size of the country’s energy sector.
Thursday, April 19
The U.S. is to produce government data on unemployment claims, followed by industry data on existing home sales and a report on manufacturing activity in the Philadelphia area.
Friday, April 20
Canada is to round up the week with official data on consumer price inflation, which accounts for the majority of overall inflation.
Also Friday, the International Monetary Fund is also scheduled to hold the first of two days of meetings in Washington.
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